Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

HULL TIDAL SURGE BARRIER BILL

[Queen's consent on behalf of the Crown, signified]

Read the Third time and passed.

MEDWAY PORTS AUTHORITY BILL [Lords]

METALS SOCIETY BILL [Lords]

UPPER MERSEY NAVIGATION BILL [Lords]

Read a Second time and committed.

Oral Answers to Questions — EDUCATION AND SCIENCE

Local Government Reorganisation

Mr. Dormand: asked the Secretary of State for Education and Science what consultations she has had concerning the administration of education under the Local Government Act 1972.

The Secretary of State for Education and Science (Mrs. Margaret Thatcher): My Department consulted the associations of local authorities and the staff interests chiefly involved before the issue of circulars Nos. 1/73 and 8/73.

Mr. Dormand: The Act contains no provisions to decentralise the administration of the education services. In those circumstances, is the right hon. Lady aware that the advisory committees, with or without an officer, that are recommended in one of the circulars she men-
 

tioned—circular 1/73—are utterly useless? She will get no responsible people to serve on such committees when they realise that they have no powers. By the same token the Minister might tell us what became of the extra powers that were talked about for managers and governors. The local touch in this most personal of services has been lost under the Act. What does the Secretary of State propose to do about it?

Mrs. Thatcher: I think that the hon. Gentleman is trying to go back on an Act that has already passed through the House. I do not agree with him that people will not serve on advisory committees because they have no executive authority. We find no shortage of people to sit on them and no shortage of recommendations to set them up.

Priority Areas (Northern Region)

Mr. Horam: asked the Secretary of State for Education and Science what proportion of the spending on educational priority areas is in the Northern Region: and how this compares with other regions.

Mr. Radice: asked the Secretary of State for Education and Science how expenditure on education priority areas in the Northern Region compares with that in other regions.

Mrs. Thatcher: Educational priority areas have not been designated as such. The sum of £7·9 million has been approved for educational projects in England under the urban programme and £1·25 million or 16 per cent. of that total has been allocated to the Northern Region where the pupils in maintained primary and secondary schools represent 7·7 per cent. of all pupils in such schools.
With permission, I will circulate in the OFFICIAL REPORT details of the amounts allocated to the other regions.

Mr. Horam: Does the Secretary of State agree that the total spending on positive discrimination as such nationwide cannot be more than about £10 million in a year? The Government have just given mortgage borrowers £15 million for three months. Does not that show that educational priority is a sham? When will the Minister put real resources behind the programme?

Mrs. Thatcher: I think that the hon. Gentleman is criticising his own Government for the smallness of their assistance.
 


I have carried out precisely the urban programme for the education services in conjunction with the Home Office. As to the regional figures, the Northern Region has had a fairly big share of the available money.

Mr. Radice: Is the right hon. Lady aware that the North is an area of exceptional need, as shown by the fact that, according to recent statistics, over 50 per cent. of school leavers there left without a pass grade in any national examination? Does she realise that educational progress in the North, as elsewhere, is being held up by the unrealistic cost yardstick applied by her Department?

Mrs. Thatcher: The cost yardstick does not, I think, come under the urban programme but comes under the capital school building programme. If the hon. Gentleman looks at all the figures in the whole table, he will find that the Northern Region, in receiving 16 per cent. of the money while having only 7·7 per cent. of the pupils, did as well as, if not better than, any other region.

Mr. Hattersley: In her main answer the right hon. Lady said that educational priority areas have not been designated as such. I urge her again to consider setting objective criteria for determining such areas. How can we ever measure that the right amount of resources is going into educational priority when we do not know which areas should be helped in this way?

Mrs. Thatcher: I repeat that no educational priority areas have ever been designated, but schools of particular difficulty have been designated. There are nearly 600 such schools. It was thought that that was the best way to tackle the problem.

Following is the information:

URBAN PROGRAMME ALLOCATIONS (PHASES 1 — 7) BY REGIONS


Region
£000s
Per cent.


Northern
1,258
16·0


Yorkshire and Humberside
1,107
14·0


North-Western
1,553
19·7


East Midlands
511
6·5


West Midlands
1,239
15·7


East Anglia
28
0·4


Other South East
322
4·1


Greater London
1,643
20·8


Southwestern
222
2·8


Total
7,883
100·0

United States of America

Mr. Douglas: asked the Secretary of State for Education and Science if she will seek to pay an official visit to the United Slates of America.

Mrs. Thatcher: I have no plans to do so at present.

Mr. Douglas: That is a disappointing answer. Will the right hon. Lady get her Department to examine the relationship of United States technological universities to the petroleum industry, with particular regard to how they are using the spin-off from the space programme, linking it to underwater research and the production of petroleum?

Mrs. Thatcher: I expected that the hon. Gentleman would ask a supplementary question about the petroleum industry. The United States having had an offshore industry for a good deal longer than we have, it is not surprising that it has many more extensive facilities for education and training. We have about six universities with relevant courses and a number of further education establishments which offer relevant training.

Mr. John E. B. Hill: Even if my right hon. Friend is not immediately visiting America, will she, in observing the American scene, see whether this country has anything to learn from American experience and its successes and failures in such matters as the maintenance of students in universities, the difficulties of comprehensive schools in poor neighbourhoods and the right of free education to exist alongside State education?

Mrs. Thatcher: I am always willing to learn from the educational system of any country. I would add one more matter to my hon. Friend's list—the close cooperation between industry and the universities in that country. I agree with him in his list.

Mr. Faulds: If the right hon. Lady should decide to visit America, will she view British art treasures in the great American public galleries which have been bought with tax advantages to their donors? Does she accept that many more works of art of British national and historic importance are likely to leave these shores as a direct result of the fiscal
 


Philistinism of VAT which discriminates against native buyers?

Mrs. Thatcher: I have already seen and enjoyed very much some of the treasures in the art galleries of the United States. The hon. Gentleman's supplementary question should be addressed to my right hon. Friend the Chancellor of the Exchequer.

Petroleum Engineering

Mr. Millan: asked the Secretary of State for Education and Science if she will issue a progress report on discussions between her Department, the University Grants Committee and universities concerned with implementing the recommendations of the Internal Management and Engineering Group report.

Mrs. Thatcher: My Department and the UGC are still examining with other interested Departments whether further specialist courses are required to meet the needs of the industries concerned.

Mr. Millan: There does not seem to be a great deal of urgency in that answer. Is the Minister aware that, if we are to cut back the American lead which she acknowledged in reply to the previous Question, it is extremely important that we in this country should take quick action? The IMEG report makes certain recommendations for the establishment of a working party and draws particular attention to the absence of even one chain of petroleum engineering. Will the Minister pursue all these points with urgency, because a Government lead is required?

Mrs. Thatcher: There are six universities which have chairs relevant to the petroleum industry. Courses are available in further education establishments in drilling techniques and exploration methods. Before we decide to take more action we should decide precisely what action to take, because it needs not only to be more but to be appropriate.

Mr. Marten: Is not the lack of highly-trained experts a reflection on the failure of our educational system to look forward to the country's requirements a number of years ahead? Is there not a case for manpower planning with a long forward look?

Mrs. Thatcher: If manpower planning had been expert enough to tell us precisely what was required, the education services would have responded and produced the people. As it is there are six universities with chairs in subjects relevant to this industry, and we are still considering precisely what new specialist facilities are required. It is not a general "more" that we want, but particular courses in particular areas.

Mr. Moyle: Does not the right hon. Lady agree that Professor Ridell said in his report that, if the oil drilling business in the North Sea is to go to British and not to American subcontractors, we must take steps to ensure that there is an adequate body of British trained oil drilling engineers? What has the right hon. Lady done about achieving this body of personnel since the report was published? If she has not done anything, when will she be in a position to allocate Government resources and Government money and take Government action?

Mrs. Thatcher: The report was pub lished comparatively recently, and we are considering with the Department of Trade and Industry and the Scottish Office exactly how to tackle the problem. In the meantime, from what the hon. Gentleman says one would think that nothing was taking place in British universities but there are relevant chairs in Aberdeen, Heriot-Watt, University College, London, Manchester and Liverpool Universities, Imperial College and Glasgow University.

School Leaving Dates

Mr. Madel: asked the Secretary of State for Education and Science whether she is satisfied with the arrangements for the dates during the academic year when children may leave school; and if she will make a statement.

Mrs. Thatcher: Yes, Sir. I am satisfied with the present arrangements.

Mr. Madel: As there are three terms in the academic year, could not there be three leaving dates? May I draw to my right hon. Friend's attention the children whose sixteenth birthday falls in the early part of September 1973 and who have been offered a job on 1st January but cannot take it up because they cannot leave school until Easter 1974?

Mrs. Thatcher: Yes, there are particular hard cases which would have occurred almost wherever we had set the date for school leaving. It is a problem and very hard luck on those who fall just on the wrong side of the line. It would be unwise to return to having three school leaving dates because it would be difficult to arrange a relevant curriculum for just one term, and a great deal of the good work done by raising the school leaving age would be undone.

Deaf Children

Mr. Pavitt: asked the Secretary of State for Education and Science if she will issue advice to local education authorities that further education classes for the deaf to learn to lip-read need not conform to the minimum number required for other subjects; and that for the most effective results no lip-reading class should have more than eight students.

The Under-Secretary of State for Education and Science (Mr. St. John-Stevas): I do not think advice is necessary. Local education authorities can provide classes for small numbers if local circumstances permit.

Mr. Pavitt: Is the hon. Gentleman aware that, although they can, they do not? The largest cities are applying arbitrary figures which do not permit the decent teaching of lip-reading. As this is a very neglected area, will the hon. Gentleman reconsider his answer and set up a departmental inquiry? It is a disgrace to civilisation that we are not doing more in this field.

Mr. St. John-Stevas: I share the hon. Gentleman's concern about this subject, but in fact local education authorities are more sympathetic than perhaps he allows. In reply to the second part of the hon. Gentleman's supplementary question, my Department, in consultation with the Department of Health and Social Security, is working on an inquiry to find out the extent, actual or intended, of local education authority provision of classes in lip-reading. When we have this information it will be publicised by the Royal National Institute for the Deaf and through other suitable channels.

London Allowance

Mr. Thomas Cox: asked the Secretary of State for Education and Science
 

what has been the increase in the cost of living since the last increase was made in the London teachers' allowance.

Mrs. Thatcher: London allowance is not calculated on the basis of the retail price index, which has risen by 20·2 per cent. It is calculated on the differential between the cost of living in London and elsewhere, using a special index devised in 1967.

Mr. Cox: Is not the Minister aware that, however it may be calculated, there has been an extremely large increase in the cost of living since the London teachers' allowance was last increased? Against that background, the offer of £15 a year to London teachers is derisory. For how much longer are we to see teachers generally and young teachers especially leaving London schools before the Minister faces the seriousness of the problem and allows free negotiation on the merits of the London teachers' allowance?

Mrs. Thatcher: The retail price index is taken into account in the ordinary pay negotiations of the teachers as it affects the whole country. From 1st November 1970 there have been two salary awards, a 10·8 per cent. increase overall from 1st April 1971 followed by a 9·6 per cent. overall increase on 1st April 1972. The London allowance is based on the differential between the increased cost of living in London and elsewhere, and it is on that basis that the formula resulted in the £15 increase, which is in fact a 12 per cent. increase.

Mr. Grylls: Will my right hon. Friend ask the Burnham Committee to consider special allowances for teachers in the Home Counties who find the extra cost of housing difficult to bear on a teacher's salary?

Mrs. Thatcher: The extra cost in the Home Counties comes in on the other side of the equation in a reduced differential between the cost of living elsewhere and in London. It would be open to the Burnham Committee to make such a recommendation if it wished.

Mr. Stallard: Will the Secretary of State come back to the question asked by my hon. Friend the Member for Wands-worth, Central (Mr. Thomas Cox) and give us an insight into her intentions about the position facing the Inner
 


London Education Authority because of the difficulties of young teachers in finding accommodation in inner London at rents they can afford?

Mrs. Thatcher: Some of the London areas either provide travelling allowances or make special arrangements for the allocation of council houses for their teachers. It is a matter for them. This is a problem that concerns not only teachers but a number of other people.

Mr. Selwyn Gummer: Will my right hon. Friend carry out negotiations with those London boroughs like the London borough of Lewisham which are extremely unhelpful in providing housing for teachers? The position is made more difficult when they are running a campaign to reduce the number of houses for sale, even if teachers could afford to buy them.

Mrs. Thatcher: I am sure that the London borough of Lewisham will take account of the point made by my hon. Friend and I will make certain inquiries.

Mr. Hattersley: The Secretary of State has told the House of the traditional criteria for determining teachers' salary increases. Have not the Government laid before the House an order to make sure that those traditional criteria are subsumed by their policies concerning pay increases?

Mrs. Thatcher: No. The hon. Gentleman referred to traditional criteria for pay increases. The criteria to which I think he refers in the context of the Question relate to the London allowance, and it would be a matter for the Burnham Committee, if it wished, to take those as continuing. How they are to be dealt with against the global sum is again a matter for the Burnham Committee.

Mr. Hattersley: The Secretary of State must begin to answer at least some of the questions. May I put this question to her again? Is there not an order now laid before the House in the Government's name to make sure that if the normal criteria for London or anywhere else are agreed by Burnham, that shall be overruled by the requirements of the Government's pay policy?

Mrs. Thatcher: The London allowance is part of the global sum. It would
 

not be open to the Burnham Committee or any other committee to come to a total settlement in excess of the global sum.

Teaching Profession

Mr. Spearing: asked the Secretary of State for Education and Science when she last met a deputation from the National Union of Teachers on the subject of the future size of the teaching profession; and if she will make a statement.

Mrs. Thatcher: On 2nd April 1973. I have nothing to add to the statement made by my hon. Friend in the debate on 4th April.

Mr. Spearing: Is the Secretary of State aware that some of the pet figures given by her hon. Friend were not available to the deputation which she saw two days previously? Is she also aware that the hon. Gentleman said that she would provide any figures that she considered necessary? Does she not consider that she ought to supply the expected numbers of teachers who will leave the profession and the projections of pupils becoming 16-plus between now and 1981? Will she also provide the range of expectation? Surely these figures are required to prove her target figure of 510,000.

Mrs. Thatcher: My hon. Friend gave a great number of figures to the House in reply to the hon. Gentleman's Adjournment debate on 4th April. I am now attempting to set up a national advisory committee on the supply and training of teachers which I expect will go further into these figures.

Mr. Deakins: Will the Secretary of State tell the House how areas in the urban aid programme are to set about reducing class sizes in the next decade if the teacher supply is not stepped up beyond the forecasts in her White Paper?

Mrs. Thatcher: The teacher supply is being increased very considerably. I fail to see how going from 385,000 to 510,000 in a decade is not substantially increasing teacher supply.

Polytechnics (Research)

Miss Fookes: asked the Secretary of State for Education and Science what proportion of polytechnic resources are being devoted to research.

Mrs. Thatcher: Complete information on the research expenditure of polytechnics is not available in the Department. About 4 per cent. of their total expenditure in 1970–71 was for scientific research.

Miss Fookes: Does my right hon. Friend agree that it would be helpful if there were more information on this matter? Does she also agree that there is a need for a radical reappraisal of the hitherto limited role allocated to research in polytechnics?

Mrs. Thatcher: On the whole, polytechnics are meant to be centres of teaching rather than of research, with sufficient research to carry out the teaching function in the best possible way. I cannot give complete figures because of the way that polytechnics are financed. As my hon. Friend knows, Committees of this House have had certain comments to make about them.

Adult Education

Mr. William Price: asked the Secretary of State for Education and Science what action she intends to take following publication of the Russell Committee report on adult education.

Mr. Ellis: asked the Secretary of State for Education and Science what action she proposes following the publication of the Russell Committee report on adult education.

Mr. St. John-Stevas: My right hon. Friend is studying the report which was published a fortnight ago. She will in due course be consulting those organisations which have a special interest in adult education.

Mr. Price: While all of us would hope to see the maximum numbers possible involved in adult education, may I ask what evidence there is of long-term Government planning to ensure that people's expectations are met regarding employment and what evidence there is that the jobs for which they are qualified will be available?

Mr. St. John-Stevas: That is hardly a matter that comes within the province of my Department, but the Government's foresight regarding adult education is shown by the importance which we attach to this report.

Mr. Ellis: In view of the general criticism that the report is modest, may I ask whether the Minister can find it in himself to give the merest hint of the likelihood of a strong positive lead in due course by his Department?

Mr. St. John-Stevas: I recognise the hon. Gentleman's interest, but he must be reasonable. The report has been published for only a fortnight and it has taken four years to prepare. I think that we must be given reasonable time to study its implications.

Mr. Wilkinson: In the light of the report, may I ask my hon. Friend to give some indication of his attitude to the Open University which is a major influence in the whole sphere of adult education and has done extremely good pioneering work? Will he say whether the Government feel that the multi-media approach and the credit system of assessment over the fairly long period in which adults are engaged in study are useful contributions in this area?

Mr. St. John-Stevas: I have always thought that the Open University was making a most important contribution to education. I was glad when it was founded and pleased to go with my right hon. Friend to pay an official visit there a few weeks ago.

Mr. Robert C. Brown: My hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) has exposed the White Paper as a complete "con" trick on the public as there is no provision in it for adult education. If the Russell Report is to be implemented, surely the White Paper must be rewritten?

Mr. St. John-Stevas: I believe that the White Paper on Education will count as one of the seminal educational documents to be published and will be remembered long after the inaccurate comments by the hon. Member for Birmingham, Spark-brook (Mr. Hattersley) have been forgotten. The adult education programme was not considered in the White Paper because it was the subject of a separate report.

Deaf Children

Mr. McCrindle: asked the Secretary of State for Education and Science


whether she is satisfied with the availability of teachers for deaf children; and if she will make a statement.

Mrs. Thatcher: I will, with permission, answer this Question—I am sorry, it is for my hon. Friend to answer.

Mr. St. John-Stevas: It merely shows the zeal of the Department.
The Department is already considering various matters connected with the education of children with impaired hearing. They include the training and supply of teachers, and my right hon. Friend will decide later on any action to be taken.

Mr. McCrindle: Has my hon. Friend's attention been drawn to a recent report which said that teachers were leaving schools for deaf children twice as fast as they could be replaced and that it was not unusual for a child to wait two years for entry into a special school? As this is a particularly debilitating complaint for a child, may I ask my hon. Friend to show some of the zeal to which he has just referred by doing his best to recruit additional teachers in this sector?

Mr. St. John-Stevas: I am familiar with the Press reports to which my hon. Friend has referred. Those reports about the teaching situation in schools for deaf children have been greatly exaggerated. For example, the report that nearly one-third of the teachers did not hold the necessary qualification was completely misleading. The matter is being thoroughly investigated within my Department. We have already had two meetings with specialists and a third is in prospect. We hope to reach a conclusion on this important subject before the end of the year.

South Africa (Secretary of State's Visit)

Mr. Judd: asked the Secretary of State for Education and Science whether she will make a statement on her visit to South Africa.

Mr. Leslie Huckfield: asked the Secretary of State for Education and Science whether she will make a statement about her recent official visit to South Africa.

Mrs. Thatcher: I attended the inauguration of a new observing station
 

for the South African Astronomical Observatory as the Minister responsible for the Science Research Council which is a partner in the observatory with the South African Council for Scientific and Industrial Research.

Mr. Judd: Does the right hon. Lady feel no responsibility as the guardian of all the finest traditions of liberal education? Why did she not take the opportunity, whilst in South Africa, to make it absolutely clear beyond doubt that the British people and Government are fundamentally opposed to the persecution of students and academics in South Africa and anywhere else in the world?

Mrs. Thatcher: At my original conference I made very clear indeed the Government's views on apartheid and how we view the role of students.

Mr. Huckfield: Did the right hon. Lady feel moved to say anything about the case of John Hosey from Coventry, about which I sent her a telegram? Does not she realise that he has already been imprisoned without trial for six months and that he could face a sentence of at least five years' imprisonment if he were convicted under the Terrorism Act when his only crime was handing out leaflets?

Mrs. Thatcher: The hon. Gentleman sent me a telegram and I sent him a reply. The person to whom he refers is a citizen of the Irish Republic, and as such I felt that I had no locus.

Mr. Maclennan: If the Secretary of State is not prepared to make a protest, will she at least consider that the South African Government are depriving Africans of education, and black Africans in particular? Will she give thought to the possibility of offering places at higher institutions of learning in this country to black African students who are debarred by the Government of their country from access to technical education in their own country?

Mrs. Thatcher: While I was in South Africa I visited two educational establishments. I visited the Oral Learning Centre School in Cape Town for disadvantaged children in the coloured part of Cape Town, and the University of the Western Cape, which is a university for coloured people.

Mr. Evelyn King: While we deplore much that happens in South Africa, is not the last question a little misjudged? Is it not a fact, and should not the fact have been brought out, that the educational provision for black Africans in South Africa is better than in any other State in the African continent?

Mr. Huckfield: Rubbish.

Mrs. Thatcher: With respect, I do not think that is a question for which I am responsible. I visited the Oral Learning School.

School Transport

Mr. Redmond: asked the Secretary of State for Education and Science if she can yet announce the findings of her working party on school transport.

Mrs. Thatcher: No, Sir.

Mr. Redmond: While obviously the work of the working party should be thorough and in the end right rather than quick, may I ask whether we can hope for a quick decision on this matter before the new school year starts? If a decision is made we will not have the upheaval which we had at the beginning of the present school year, which was caused because parents could not understand the nonsense.

Mrs. Thatcher: I doubt whether any decision will come in time for the new school year. I understand that the working party is coming up against the difficulty that it is taking longer than it had thought to get from all the local authorities the necessary factual information about their transport practice. Most of the information has now been received, and the working party has recently heard oral statements of evidence from the representatives of nine remaining organisations. I still doubt whether the result will be out before the end of the next school year.

Mr. Terry Davis: Will the right hon. Lady publish the names of the authorities which have been so slow in producing the facts?

Mrs. Thatcher: Perhaps the hon. Gentleman is being a little critical of the authorities. They have on their hands a complete local government reorganisa-
 

tion as well as many of the demands which we are now making upon them. It would be better if we took that factor into account.

London Teaching Staff

Mr. Deakins: asked the Secretary of State for Education and Science what steps she is proposing to take to help greater London boroughs which are losing young teachers because of the high cost of living in London.

Mrs. Thatcher: First, we need to establish the facts about the rate of turnover in London and elsewhere and, as far as possible, the reasons for it. I am considering setting up a sample survey covering the whole country.

Mr. Deakins: Why did the Government insist before the recent Burnham negotiations that the London teachers' allowance must be considered as part of the global sum when that has not traditionally been the case? As nothing is likely to be done about an effective increase in the London teachers' allowance, is not the right hon. Lady aware that in educationally and socially deprived areas such as mine in Waltham-stow, and in many other parts of London, the educational system will gradually be run to a halt, to the detriment of the interests of working-class children in those areas?

Mrs. Thatcher: The London allowance was treated by virtue of the White Paper in the same way as any other sums which are counted as remuneration. It fell under that particular head.

Mr. Selwyn Gummer: Does my right hon. Friend accept that without any working party it is fairly clear that the cost of housing in London makes it difficult for teachers to live in the area in which they teach? Many local authorities do not do much about this. Because of the difficulty for teachers, does my right hon. Friend propose to consult her right hon. Friends and to ensure that local authorities do their utmost to help in the provision of housing for teachers?

Mrs. Thatcher: That consultation has already taken place. I said in reply to my hon. Friend's last question, although I do not think he heard it, that I would make inquiries from his authority.

Mr. Molloy: Is the right hon. Lady aware that Mr. Aubrey Jones' Prices and Incomes Board specifically ruled that London weighting for teachers would not and should not be part of the global sum? That is why teachers in London feel that the right hon. Lady is cheating them. In consequence there is great bitterness. It has been put to me by many teachers in London "If you want to get on in teaching, get out of London". Is not that a serious condemnation of the right hon. Lady's attitude towards the problem?

Mrs. Thatcher: The counter-inflation policy and the pay and prices legislation have already passed through the House. The Inner London Education Authority still has one of the best pupil/teacher ratios in the country.

Universities of Technology

Mr. Eadie: asked the Secretary of State for Education and Science what advice she has received from the University Grants Committee on financial resources available for universities of technology.

Mr. St. John-Stevas: Before my right hon. Friend settled the total grants for the 1972–77 quinquennium the University Grants Committee gave her its confidential advice on the whole range of university development. The UGC decides the individual allocations.

Mr. Eadie: Is not the hon. Gentleman aware that the finance allocated, for example, to offshore engineering technology is ridiculously inadequate? Are not the Government shamed when they find that a distinguished draper gave £180,000 to the Heriot-Watt University to assist it in its offshore engineering technology? Have the Government no statement to make? Should not the Government apologise to the House for treating such a serious position in so niggardly a fashion?

Mr. St. John-Stevas: I do not think there is anything to apologise for when recurrent and equipment grants under the quinquennium will total £1,790 million. The hon. Gentleman mentioned the Heriot-Watt University. That university has benefited by a raising of the recurrent grant, which is to increase by 65 per cent. from £1·87 million to £3·09
 

million. It is perfectly acceptable that such major provisions should be supplemented from private sources.

Sir G. Nabarro: Will my hon. Friend assure the House that the great technological developments evident off the shore of Scotland are reflected in the grants which were probably evolved, developed and calculated long before the extent of North Sea natural gas was fully evident to my hon. Friend's Department and to the University Grants Committee? Has the sum of money for the Heriot-Watt University, for example, been beamed specially towards North Sea exploration and development?

Mr. St. John-Stevas: That must be a matter for the university to decide. For specific research projects any university, including Heriot-Watt, can apply to the research council. It is also wholly justifiable for Heriot-Watt to see what help it can get from the petroleum industry. Heriot-Watt is establishing an institute of offshore engineering, thanks to the generosity of the Wolfson Foundation.

Mr. Dalyell: Are the Government prepared to match Wolfson's £170,000?

Mr. St. John-Stevas: As I have already said, we have made grants to Heriot-Watt which are very much in excess of the grant from the Wolfson Foundation.

Student Grants

Mr. Molloy: asked the Secretary of State for Education and Science what progress she has made in her consideration of representations submitted to her on student maintenance grants; and if she will now make a further statement.

Mr. Stallard: asked the Secretary of State for Education and Science whether she will now make a further statement on the National Union of Students' claim for increases in maintenance grants.

Mr. McNamara: asked the Secretary of State for Education and Science if she will now make a further statement on her consideration of representations made to her on student maintenance grants.

Mrs. Thatcher: I have no statement to make at present.

Mr. Molloy: Is the right hon. Lady aware that such a casual reply to such an
 


important question will be viewed with grave dismay by the universities? Is she further aware that from vice-chancellors downwards all staff, as well as the students, now realise that the poverty level of students' grants and ever-increasing prices are having a grievous effect on their desire to study and a deleterious effect throughout our universities? Will the right hon. Lady consider the matter?

Mrs. Thatcher: I do not accept the last part of the hon. Gentleman's question. There will be a small increase in September, because this is the last year of the triennium and, therefore, we have about a 4½ per cent. increase still to come. I am still considering the matter further, but I have no statement to make today.

Mr. Stallard: I realise that the very mention of students immediately raises the blood pressure of many of the Secretary of State's right hon. and hon. Friends, so I appreciate some of her difficulties. Will she say whether it is true that local education authorities are picking up more by way of parental contributions than her Department budgeted for when fixing the present level of student grants? Does not the right hon. Lady consider that that fact and the fact mentioned by my hon. Friend the Member for Ealing, North (Mr. Molloy) provide sufficient grounds for her to review and increase the present level of grants?

Mrs. Thatcher: I cannot accept the first part of the hon. Gentleman's question. In view of what the present Government have done to help to increase the number of people attending universities and to increase the polytechnic and further education building programmes, I scarcely think that it could be said that they were anything other than in great favour of students. The other point, about parental contribution, is one upon which I have received representations, and these are being considered along with the point about the increase in grants.

Mr. John E. B. Hill: As the National Union of Students has now taken as part of its settled policy the making of non-advanced work in further education a subject for mandatory awards, will my right hon. Friend give an indication of what the cost might be?

Mrs. Thatcher: It would be very difficult to tell, but I do not think there is
 

any question of making every award mandatory along the lines which, I understand from reports, the National Union of Students required. There are two different points: one is about making all awards mandatory; the other is about making awards for certain courses equal to mandatory awards. They are rather different.

Mr. McNamara: Regarding the examination which she is to make of this matter, will the right hon. Lady say whether she will do away with the terrible discrimination against married women students, and in particular the younger married women students, who are subject to two means tests, first on the husband's possible income and, secondly, on the parents' possible income? Is not this particular form of discrimination grossly unfair and will not it encourage people to live in sin?

Mrs. Thatcher: The question of the grant for the married woman student is a matter for the next triennium. We are now coming to the last year of the present triennium. The hon. Gentleman is wrong perhaps about many things, but about one thing certainly. The married woman student whose husband is not a student does not have his income means-tested.

Mr. Redmond: Will my right hon. Friend bear in mind that, although many students have totally alienated themselves from public sympathy by their behaviour, there are many decent students who are getting seriously into debt and that this is really hindering their studies when they are anxious to do well at university?

Mrs. Thatcher: I agree with my hon. Friend that we should not judge the great body of students by the reported behaviour of one or two. I shall certainly take into account the point made by my hon. Friend.

Mr. Moyle: Why are the Government so perverse? Where groups of workers do not want to have anything to do with the Government's £1 plus 4 per cent. formula, the Government try to force it upon them, but where it would be of help to students, the Government withhold it from them. How can the right hon. Lady justify someone buying a £40,000 house and receiving further aid
 


from the Government and the Government withholding everything from students receiving a few pounds a week?

Mrs. Thatcher: The hon. Gentleman is fundamentally wrong in equating remuneration with grants.

School Building Programme

Mr. John E. B. Hill: asked the Secretary of State for Education and Science when she will announce details of the next school building programme.

Mrs. Thatcher: I hope by Easter to have given most local education authorities details of their preliminary lists of projects on which work is expected to start in 1975–77.

Mr. Hill: Will this programme maintain the trend in expansion? To what scale of cost limit will it be geared? When the local education authorities have received notice of their allocation, will my right hon. Friend consider placing copies of these allocations in the Library for the convenience of hon. Members?

Mrs. Thatcher: The new programme will be on the existing cost limits. I shall certainly place copies in the Library. We have just announced the first new improvement programme for secondary schools, with some 54 new secondary schools replacing old schools.

Mr. Marks: Will the cuts which the right hon. Lady is making in the total school building programme over the next two years be felt more in the primary school sector or in the secondary school sector?

Mrs. Thatcher: I am not aware of the cuts to which the hon. Gentleman refers. There is a vastly increased primary school building programme and a secondary school improvement programme for the first time. Basic needs are certainly down. This is a matter of the number of children. Both the raising of the school leaving age and the countercyclical programme have now been completed.

CONSERVATIVE COLLEGE (PRIME MINISTER'S SPEECH)

Mr. Ashton: asked the Prime Minister whether he will place in the Library
 

a copy of his public speech at Masham near Ripon on the economy on 25th March.

Mr. William Hamilton: asked the Prime Minister if he will place in the Library a copy of his public speech made on 25th March at Swinton Conservative College concerning national unity.

Mr. Frank Allaun: asked the Prime Minister if he will place in the Library a copy of his public speech on the economy at Swinton College on 25th March.

Mr. Meacher: asked the Prime Minister if he will place in the Library a copy of his public speech at Masham on 25th March on industrial and economic matters.

Mr. Skinner: asked the Prime Minister if he will place in the Library a copy of his public speech to the Swinton Conservative College on 25th March on economic matters.

Mr. Molloy: asked the Prime Minister if he will place in the Library a copy of his public speech to Swinton Conservative College at Masham on 25th March on industrial relations.

Mr. Bidwell: asked the Prime Minister if he will place in the Library a copy of his public speech at the Conservative College, Swinton, Yorkshire, on Sunday 25th March on industrial relations.

Mr. Duffy: asked the Prime Minister if he will place in the Library a copy of the public speech he made on 25th March at Swinton Conservative College on national unity.

Mr. Wyn Roberts: asked the Prime Minister if he will place in the Library a copy of his public speech on tripartite partnership, delivered at Masham on 25th March.

Mr. McCrindle: asked the Prime Minister if he will place in the Library a copy of his public speech at Swinton, Yorkshire, on industrial relations on 25th March 1973.

Mr. Redmond: asked the Prime Minister if he will place in the Library a copy of his speech on 25th March at Swinton Conservative College on the subject of industrial relations.

The Prime Minister (Mr. Edward Heath): As I told the right hon. Member for Orkney and Shetland (Mr. Grimond) on 29th March, I did so on 26th March.

Mr. Ashton: In his speech the Prime Minister said that the Conservative Party represented all the people and the consumers and not just sectional interests. Therefore, will he say why his Government agreed in Luxembourg last week to sell butter to the Russians for only 8p per 1b. when butter sells at 28p per 1b. in Britain? Hundreds of tons of butter are involved. It is forecast that before the end of this year there will be a further increase of 5p per 1b. to the British housewife.

The Prime Minister: The full co-the mountain of butter which had been accumulated before we became a member of the Community and which was held as a result of intervention by the six former members of the Community. We did not, therefore, think that we were entitled to prevent this taking place.

Mr. Hamilton: Which of the Government's policies does the Prime Minister consider has had the most unifying influence in the nation? Is it his taxation policies which favour the rich, his housing policies which favour the owner-occupier against the council tenant or the Industrial Relations Act which penalises the trade unions? [HON. MEMBERS: "Speech."] Have not those policies been the most divisive policies for 100 years? For the right hon. Gentleman to talk about unifying the nation is absolute nonsense.

The Prime Minister: The full cooperation which we have had from the trade union movement as well as from employers in the standstill now in stage 2 completely contradicts everything that the hon. Gentleman has said.

Mr. Roberts: Does my right hon. Friend agree that what Mr. Scanlon described as a victory for the Government was a victory for common sense? Does he also agree that industrial action is costly not only to individuals but to industries and the country as a whole? Furthermore, does my right hon. Friend agree with the right hon. Member for East Ham, North (Mr. Prentice), who described the proposed strike on 1st May
 

as wrong in principle and wrong in tactics?

The Prime Minister: I certainly agree with the remark which has just been quoted. It is not a question of a victory for anyone; it is a national victory that we should be able to move forward together with an expanding economy in these circumstances. I hope that it can become a voluntary arrangement, as I have previously said.

Mr. Allaun: Is it not dishonest of the Prime Minister to talk about curbing prices when at the end of this month he will impose a further rent increase on millions of private tenants and council tenants? Is it not a poor excuse to say that there will be rent rebates when only a minority will be eligible? Only 750,000 will have the opportunity of applying for these rebates out of a total of 6 million council house families. Is that a good Government excuse?

The Prime Minister: The hon. Gentleman is quite wrong with his figures. If he takes the total number of those in local authority houses and the private tenants who will be able to get rebates, he will find that the figure is very much greater than 750,000, because the 750,000 figure relates to private tenancies alone.

Mr. Loughlin: Give us the number.

The Prime Minister: There is no need for the hon. Gentleman to shout. The plain fact is that by putting up the needs requirement by £3·50 we have covered all of those up to average industrial earnings level even after the payment of £1 plus 4 per cent. This means, therefore, that this will be of great benefit to all those tenants.

Hon. Members: How many?

Mr. Meacher: Since the right hon. Gentleman emphasised national unity, whatever happened to the women in view of the Daily Express revelation about the slump in the Tory female vote? Is he not interested in having women in his "one nation"?

The Prime Minister: Unlike the hon. Member's leader, I pay no attention to public opinion polls.

Mr. McCrindle: Further to Mr. Scanlon's suggestion that discussions
 


might be resumed between the trade unions and the Government during the coming summer, may I ask my right hon. Friend to make it clear, as he has done in the past, that this is the Government's wish and that, if these negotiations were to be successful, they might lead to a phase 3 of the counter-inflation policy which would be much easier for both the unions and the Government to sustain than phases 1 and 2 have proved to be?

The Prime Minister: Yes, Sir, that is of course the Government's view and it is our wish to resume these talks. I was glad that Mr. Scanlon expressed the same desire yesterday and I hope that we shall now be able to arrange for them to take place.

Mr. Skinner: Can we get back to the butter mountain? Does not the right hon. Gentleman remember telling the House, along with his colleagues, time and time again that the reason why we had to join the Common Market was to enable us to compete with the two super-Powers? This is a funny way of competing, is it not?

The Prime Minister: The hon. Member would not be able to appreciate that by this sale the Commission has removed what the hon. Gentleman rightly calls a mountain of butter which has been a threat to world markets, a threat recognised particularly by those countries for which the hon. Gentleman always claims to have such concern—namely, New Zealand and the other Commonwealth countries.

Mr. Molloy: Is not the right hon. Gentleman aware that, despite his remarks in that speech about unity in the nation, Great Britain is terribly divided at the moment. [Laughter.] I know that this is a joke to Conservative hon. Members but there are feelings of great bitterness, with the rich getting richer and the poor getting poorer under the right hon. Gentleman's policies. How can he reconcile that with calling for national unity? Would he not agree that in times of stress the British working man will rally to his country, provided that there is fair play and social justice? Will the Prime Minister therefore give us today a date on which he will repeal or amend the Industrial Relations Act, to
 

ensure that a new climate can be created?

The Prime Minister: In the two years up to October 1972, the real income of the poorest section of the community rose by nearly 5½ per cent. a year—faster than that of any other section of the community and twice as fast over the first two years of this Government as over the previous six years of the Labour Government.

Mr. Redmond: rose—

Hon. Members: Hear, hear.

Mr. Speaker: Order. The hon. Member has a Question down and he is entitled to put a supplementary question.

Mr. Redmond: Would my right hon. Friend agree that it would help the situation in Europe if Labour Members would join the British delegation to the European Parliament?

The Prime Minister: I always like to take the optimistic view that for the Labour Party to accept its responsibilities would always be helpful. [Interruption.]

Mr. Speaker: I heard the hon. Member's intervention. A Member is entitled to be heard if I call him.

Mr. Hamilton: rose—

Hon. Members: Order.

Mr. Bidwell: In that speech the right hon. Gentleman pretended to be on the side of the poor as well as on the side of the rich. Does he think that he is being thought of now in the Conservative ranks as one who has deserted the rich, since the racialist millionaire Monday Club members have decided to back the right hon. Member for Wolverhampton, South-West (Mr. Powell)?

Mr. Marten: Does not the question of this butter illustrate to ordinary British people the absurdity of the common agricultural policy? [HON. MEMBERS: "Hear, hear."] Is it not time that the Government's representative made it clear to the Common Market that the CAP has to be radically changed or abandoned?

Hon. Members: Hear, hear.

The Prime Minister: We have always pointed out the weaknesses of the common agricultural policy and also its


strengths. The Minister of Agriculture is at this moment dealing with these problems with the other Ministers of Agriculture in the Council of Ministers.

HOSPITAL ANCILLARY WORKERS (PAY)

Mr. Leslie Huckfield: asked the Prime Minister whether he will make a statement about his recent meeting with representatives of the TUC to discuss their request for an inquiry into the hospital ancillary workers' pay claim.

The Prime Minister: I met representatives of the TUC and some of the unions directly concerned with the hospital ancillary staff on 26th March and we discussed how best to move towards a settlement of the present dispute.

Mr. Huckfield: Does the Prime Minister believe, as his right hon. Friend the Secretary of State for Social Services implied in our recent debate, that the Government's whole economic strategy or even the Government themselves might collapse if the hospital ancillary workers' claim were to be met? Is not this the best possible argument for the workers winning?

The Prime Minister: More than 2 million workers have now made settlements under stage 2 voluntarily. We have put to the hospital ancillary workers the arrangements under stage 2 and said that they can go to the Pay Board, already established, to put forward any special reasons why they think that an anomaly should be dealt with. This is a perfectly fair argument.

Mr. Selwyn Gummer: Would not the best way for the lowest-paid to become better off be for them to accept stage 2 and then put their case to the Pay Board in stage 3?

The Prime Minister: Yes, Sir, that is absolutely right. Stage 2 has deliberately tilted the balance in the interests of the lower-paid. The women among the ancillary workers receive above average earnings for women in industry. These workers could have had this from 14th March onwards. As soon as they settle, they will get the pay.

Mr. Loughlin: While one accepts the Prime Minister's difficulties, may I ask
 

whether he does not accept that people on take-home pay of £15 a week are very badly paid? If our economy is such that we cannot afford to pay those employed by the State more than £15, would he not be better employed in trying to get some of that subsidised Common Market butter to sell to our hospital workers at 8p a pound instead of sending it to the Russians?

The Prime Minister: The average earnings—

Mr. Loughlin: £15 a week.

The Prime Minister: The average earning of these workers are just under £28 a week for men and just under £21 a week for women—

Mr. William Hamilton: For how many hours?

The Prime Minister: The offer will bring those figures up to just over £30 a week for men and nearly £23 a week for women.

EUROPEAN ECONOMIC COMMUNITY

Mr. Robert Hughes: asked the Prime Minister if he will transfer the functions of the Chancellor of the Duchy of Lancaster in relation to the conduct of Government policy in the EEC to the Secretary of State for Foreign and Commonwealth Affairs.

The Prime Minister: No, Sir.

Mr. Hughes: Does not the right hon. Gentleman accept that there is something wrong when a senior Cabinet Minister who is supposed to represent this country has no Question Time allocation of his own and therefore cannot be questioned on matters of policy like the mountain of butter which has been referred to? If there is to be no change of policy, would it not be better to end the fiction that the Chancellor of the Duchy of Lancaster speaks for Britain and admit that he has simply been relegated to the position of office boy to the Foreign Secretary?

The Prime Minister: There is no justification for that remark. The Foreign Secretary represents this country in the Council of Ministers. The Chancellor of
 


the Duchy can accompany him or represent him when required.

Miss Joan Hall: When the hon. and learned Member for Lincoln (Mr. Taverne) was appointed to the European Parliament, was he not a paid-up member of the Labour Party? [HON. MEMBERS: "No, he was not."] Does my right hon. Friend know why the Opposition were not prepared to have a debate on that subject, knowing their implacable dislike of the European Parliament? If he does not know the answer, will he ask the Leader of the Opposition?

The Prime Minister: The Leader of the Opposition must speak for himself.

Mr. Harold Wilson: Yes, Sir. In view of the Prime Minister's concern about New Zealand, which he expressed in a previous answer, will he say whether the Chancellor of the Duchy is pressing, as the Labour Government insisted as part of our terms for joining the Common Market, that we should continue, for a generation, to get cheap New Zealand butter?

The Prime Minister: We made a satisfactory arrangement for New Zealand and the Labour Government never insisted on anything in negotiations in Europe, as the right hon. Gentleman knows full well. He has consistently misled this House and the country—[Interruption.]—by saying that when he went round to visit the Heads of Government in Europe he was laying down the terms they had to accept. He knows full well that was not the case, and neither did they accept them and they never would have done. [Interruption.]

Mr. Wilson: The Prime Minister is wrong. I have quoted in this House the Cabinet minutes and the record of all the Six talks in Europe. What the Prime Minister is saying about the Labour Party is a lie.

Hon. Members: Oh.

The Prime Minister: If the right hon. Gentleman chooses to use unparliamentary language, that is a matter for him. [Interruption.]

Mr. Speaker: Order. I deprecate the use of that word. [Interruption.] Nevertheless the Prime Minister is answering and he must be heard.

Mr. Wilson: On a point of order, Mr. Speaker. If you deprecate that word I

will withdraw it. I will substitute instead the phrase you have twice allowed the Chancellor of the Exchequer to use. What the Prime Minister has said is a pack of lies.

Hon. Members: Oh.

The Prime Minister: The right hon. Gentleman knows perfectly well that what I am saying is the truth. He was never able to insist on that visit to Europe that the Community should accept the terms he is said to have laid down.

Several Hon. Members rose—

Mr. Speaker: Order. It is quite clear that we had better move on.

BILL PRESENTED

NORTHERN IRELAND ASSEMBLY

Mr. Secretary Whitelaw, supported by Mr. Secretary Carr, Mr. James Prior, Mr. Terence L. Higgins, Mr. David Howell, Mr. van Straubenzee, Mr. Attorney-General and Mr. Peter Mills presented a Bill to establish a Northern Ireland Assembly and to provide for election to that Assembly: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 108.]

BULLS AND PUBLIC PATHS BILL

3.32 p.m.

Mr. David Clark: I beg to move,
That leave be given to bring in a Bill to forbid the pasturing of bulls aged 12 months and over at large in fields and enclosures containing public rights of way.
There is obviously—[Interruption.]

Mr. Speaker: Order. Hon. and right hon. Members wanting to conduct conversations will please do so outside the Chamber. Mr. David Clark.

Mr. Clark: There is obviously a certain comedy about bulls chasing people. However it is a comic aspect which can sometimes have extremely serious consequences. In introducing the Bill, I should like to remind the House that four people in 1971, the last year for which I have figures, were killed by bulls and that a further 59 people were fairly seriously
 


injured by them. Bulls are extremely dangerous animals. With the Bill I seek to contain this danger, especially as it affects people on public highways, namely, public footpaths.
There is considerable confusion about the law on the subject and rationalisation is now called for. There is a statutory provision of this nature in Scotland which I believe should be extended to England and Wales. In this thesis I have the support of the Gosling Committee, which was set up by the then Minister of Housing and Local Government and which reported in 1968. In paragraph 60 the Report recommended that 
the pasturing of bulls over 12 months old at large in any field through which there is a public footpath should be prohibited".
Unfortunately that recommendation was never acted upon, probably because there was no imminent pressure at the time. However, over the past 18 months pressures have developed which constitute and introduce a sense of urgency in the situation. The situation is that the Home Office in times past very wisely sent round a model byelaw to all county councils asking them to introduce a bye-law which would stop bulls being pastured in fields where there were public footpaths. All the county councils except two in Wales accepted this byelaw, with certain modifications. That was the position only about 18 months ago. Since that time there has been a spate of activity in various county councils to get these byelaws rescinded. At least five counties are currently actively in the process of changing their byelaws as far apart as Staffordshire and Dorset.
An examination shows that this is not mere coincidence but part of a calculated campaign to bring pressure to bear to change the byelaws. The reason put forward is that the country is in need of beef and one way to get more beef would be to rescind these byelaws. That is a spurious argument. We have a duty in Parliament to protect the majority of the population from these pressures. I maintain that for two basic reasons. Public footpaths have been deemed by this House to be public rights of way. They are not traditional rights, they are statutory rights, and if anyone tries to block the footpath by barbed wire the landowner is hauled before a court and action follows. I submit that the presence of

a bull in a field where there is a public path is as much a deterrent as any barbed wire.
All this is happening at a period in out history when we are trying to relieve urban pressure and encourage people to use the countryside for their leisure in a responsible manner.
The other point I feel that it is necessary to advance in support of the Bill is that bulls are extremely dangerous. Certain theories are often advanced to suggest that certain bulls are safe. These theories, I submit, are far from being foolproof. It is thought that a dehorned bull is not dangerous. In 1971 a dehorned bull killed a farmworker in Lancashire. It is further argued that the beef-breed bull is less dangerous than the milk-breed bull. In 1971 in Northumberland a farmer was killed by an Aberdeen Angus, which is a beef-breed bull. The third point often made is that bulls grazing with cows and heifers are quite safe. They may be safer, but they are never safe, as was shown, again in 1971.
In seeking leave to introduce the Bill I have concentrated a great deal on the danger. I have in my possession a letter from the Ministry of Agriculture, Fisheries and Food dated 26th March in which it comments on bulls in this way:
The only safe action that anyone can take when a bull charges is to run for the nearest refuge. It is certainly true that a bull can run faster than most human beings but once a bull has caught you he will knock you down however large a stick you are carrying, and injuries that could well be fatal will result. Bulls are always a potential danger and it is advisable to treat them with extreme caution.
That is a definitive statement from the Ministry and a correct one.
I also have the backing of dwellers in rural areas and of the National Union of Agricultural and Allied Workers. In a letter to me on 30th March the union says that it backs the Bill. The writer of the letter says that he and his colleagues go further and
… regard it as urgently necessary in view of what appears to be a concerted effort on the part of the NFU to effect a change in the byelaws which, in my Union's view, would not only constitute a danger to the user of the countryside, especially children, but would also be detrimental to the environment…
I submit that this Bill is necessary. I suggest that the byelaws which we have


are sensible byelaws I submit that we should retain the present situation. It is our duty to protect the balance in the countryside. I beg leave to introduce this Bill to do just that.

Mr. James Ramsden: Mr. James Ramsden (Harrogate) rose—

Mr. Speaker: Does the right hon. Member want to oppose the Bill?

Mr. Ramsden: Very briefly, Mr. Speaker, I am against this Bill. I do not intend to divide the House but I am against it because although there is some truth in what the hon. Member for Colne Valley (Mr. David Clark) says about the danger of bulls, if the problem is properly handled I do not think there is a case for legislation.
I was a member of the Standing Committee on the Countryside Bill, which was promoted by hon. Gentlemen opposite. It contained a clause along the lines of the hon. Member's proposal but the clause was withdrawn with the assent of Ministers of the Labour Party, on mature consideration and after consultations with the interests concerned.
I cannot remember whether I omitted to say that I am the owner of a bull which from time to time ranges in pastures traversed by footpaths.
Despite the reasonableness of the hon. Member's case, I do not think there is a case for legislation.

Question put, pursuant to Standing Order No. 13 (motion for leave to bring in Bills and nomination of Select Committee at commencement of Public Business), and agreed to.

Bill ordered to be brought in by Mr. David Clark, Mr. Arthur Blenkinsop, Mr. Michael Cocks, Mr. Peter Hardy, Mr. Leslie Huckfield, Mr. Carol Johnson, Mr. Brynmor John, Mr. John Parker, Mr. Thomas Torney and Mr. Nigel Spearing.

BULLS AND PUBLIC PATHS

Bill to forbid the pasturing of bulls aged 12 months and over at large in fields and enclosures containing public rights of way, presented accordingly, and read the First time; to be read a Second time upon Friday 4th May and to be printed. [Bill 107.]

Orders of the Day — FINANCE BILL

(Clauses 3, 4, 10, 12, 18 and 38)

Considered in Committee.

[Sir ROBERT GRANT-FERRIS in the Chair]

Clause 3

CONTINUATION OF POWERS UNDER SECTION 9 OF FINANCE ACT 1961

3.45 p.m.

Mr. Denis Healey: I beg to move Amendment No. 1, in page 4, line 30, leave out 'August 1974' and insert ' December 1973 '.
I hope, Sir Robert, that you will allow the debate on this amendment to range rather wider than is normal in Committee on the Finance Bill because, as you know, it is usual in Committee to treat the amendment on the regulator as an occasion for a general debate on the economic situation as it has developed since the Budget and the relevance of the Finance Bill to that situation as a whole. Perhaps that is particularly necessary this year because the Budget was brought forward a month to a date before that on which much of the important information which the House requires for full assessment was available. Indeed, I think the Chancellor himself would assent to the view that on the whole the Budget he introduced a month ago was a mini-Budget. He described it himself as neutral and he reserved the right to introduce a major Budget at a later stage in the year if things appeared to justify this.
In fact, we have now most of the figures available on which the Chancellor or the House would wish to base a judgment, but I am bound to say—and I am sure the Chancellor will agree—that they are rather ambiguous in every sphere except one. The figures for the growth in the gross domestic produce between 1971 and 1972 vary from an estimate of 1 to 1½ per cent. based on expenditure to one of 3 to 3½ per cent. based on output. As regards the critically important estimate of the increase in growth between the second half of 1971 and the second half of 1972—the Committee
 


will recall that the Chancellor predicted an increase of 5 per cent. for that period in his Budget statement last year—the preliminary estimates so far available suggests that the real increase was substantially short of that. The preliminary estimates suggests 4·2 per cent. although, if the average data on output, expenditure and income are taken, then the increase is nearer 3 per cent. In any case, any estimate is substantially short of the prediction which the Chancellor made a year ago.
If we turn to the figures on money supply we find the astonishing range of 11½ per cent. annual rate in Ml but nearly 40 per cent. annual rate in M3.
If we look at the unemployment figures we find a continuous and very welcome fall in unemployment accompanied by a remarkable rise in the number of vacancies notified. This suggests that in fact productivity over the past six months has been rising rather more slowly than many of us hoped and expected. Certainly some commentators have seen in these figures some signs of over-heating in the economy. I do not think the Chancellor would deny that there are serious shortages of skilled labour already appearing in some industries, particularly in South-East England.
If we look at the trade figures, the figures over the past few months suggest that the trade gap is running at something near £300 million a year. But, again, I am sure the Chancellor would agree that if he succeeds in achieving the 5 per cent. growth rate over the next 12 months to which he has pledged himself, and if simultaneously business rebuilds its stocks and increases investment, as he hopes, then we may find that figure widening very substantially by the end of the year.
I wonder whether he would comment on the suspicion that I have that last month's figures at any rate were to some extent distorted by the effect of industrial action in the Customs and Excise Department. Perhaps he would say a word about that later.
As the Government made plain during the Budget debate, they have chosen on this occasion to combine the most optimistic interpretation of all these ambiguous figures and to move ahead
 

into 1973–74 with no change in the basic policy to which they committed themselves a year ago so far as fiscal policy is concerned. Nobody hopes more than I do that their gamble will prove justified, but I do not think the Chancellor would deny that it is a very precarious gamble to which he has committed himself and the nation. Therefore he has a special responsibility to make absolutely certain that he neglects no measure whatever as Chancellor of the Exchequer which may contribute towards ensuring that the gamble comes off.
I should like to say a word or two about the two issues which he and I agree are the central issues to the success of his policy—first, the problem of investment and, secondly, the problem of inflation.
Dealing, first, with investment, I think he agreed in the Budget debate—and it was agreed by those who spoke on Second Reading last year—that the growth of productivity is the only sort of growth in which this country ultimately can be interested, because it is only growth in productivity which in the long run can bring any improvement in living standards. In speaking to this amendment later in the debate, I hope the right hon. Gentleman will say more about investment than he or his right hon. Friend the Secretary of State for Trade and Industry was prepared to say during the Budget debate.
The only real evidence that we have so far of investment intentions this year is that which was collected by the Department of Trade and Industry some months ago, filled out to some extent by the monthly declaration of investment intentions which is made by business men to the Financial Times newspaper. There are signs that the comparatively rosy outlook as regards investment which was revealed two or three months ago is giving way to a rather greyer outlook. This is not surprising. As a deliberate result of the right hon. Gentleman's own policy, the rates at which small businesses can borrow money are higher than the expected return that they can get on their capital. Secondly, small companies are already hit especially hard by the 25 per cent. increase in the tax on their profits which the right hon. Gentleman has given them every reason to expect will operate from next year
 


and will affect their behaviour in the current year. Finally, there is no doubt —and we have an enormous amount of evidence on this—that the prices and incomes policy which the Government have now defined in their code will be a very severe deterrent against investment for very many business men.
It seems to me that the most important single factor in determining whether we shall get adequate investment this year —and let us recall that we are discussing this problem against a collapse of investment over the past two years with an 8 per cent. fall in 1971 followed by a 10 per cent. fall in 1972—will be the degree of confidence amongst business men that the welcome growth that this country has enjoyed for the past six or nine months will continue at least over the next two years.
Talking to business men in this country and in the United States, I find that they are far more influenced by their expectation of the general climate of economic activity than by any direct Government incentives. I do not think that the Chancellor of the Exchequer will deny that fear of a crashing stop within the next 12 months following on the very welcome boom that we have seen over the past nine months is already beginning to influence the calculations of many business men who would have said two or three months ago that they intended to increase investment this year.
After all, it is an unusual conjunction of events to find the Financial Times, The Times and the Daily Telegraph all taking the view that the economy is overheating and that unless the Chancellor of the Exchequer takes steps now he may face a very serious crash and even the need to deflate later in the current year.
I put this question to the right hon. Gentleman, and I am sure that in the light of what he said in his Budget statement last year he will not accuse me of scaremongering. He must know that it is widely assumed in the business community in Britain and abroad that we shall run into quite severe balance of payments difficulties later this year. I hope that the right hon. Gentleman will tell us today as he did a year ago that he is not prepared to sacrifice growth this year to the maintenance of an unrealistic parity any more than he was last year.
The right hon. Gentleman is to be congratulated for his tenacity in steadfastly refusing to join the Common Market float and in reserving the right to keep the £ floating as long as he thinks it is in British interests to do so. His tenacity has given him the opportunity to meet a balance of payments deficit, which he hopes is temporary, by letting the rate fall still further. If he decides to intervene to support the rate when he gets under pressure, there is no question but that he will encounter a serious run on sterling. If that is likely to follow, that in itself will make people expect further deflationary action by the Chancellor of the Exchequer in purely fiscal terms. I hope that the right hon. Gentleman will assure the House and the country that he will be as steadfast for the rest of the year as he has been over the past few months in meeting pressure on the £ by allowing the £ to find its own level. But if the right hon. Gentleman gives that assurance, as I hope he will, that in itself will increase the inflationary pressures on the economy.
I now pass to the problem of inflation, which has dominated all our discussions of economic affairs over the past 12 months. I gather that the Morgan Guaranty Trust has estimated that the £ has depreciated against a weighted average of other currencies by some 12 per cent, since last June. When he speaks later, perhaps the right hon. Gentleman will correct that figure if I or the Morgan Guaranty Trust have it wrong.
I understand that that in itself is likely to have contributed some 2½ or 3 per cent. to the inflation from which we have suffered since last June. Although in some respects the inflationary problem seems to be improving, in others it is hardly improving at all.
The one really unambiguous indicator that we have had available since the Budget debate a year ago is the latest figures for the retail price index. Oddly enough, those figures were delayed a day when we took Treasury Questions a fortnight ago, so that we were not able to discuss their implications in detail. I have no doubt that the Chancellor of the Exchequer will tell me that they were not delayed. But he will not deny that the increase in the retail price index shows that since the so-called standstill or freeze was introduced five months ago,
 


prices have been rising at an annual rate of nearly 8 per cent. and that food prices have been rising nearly three times as fast as they were during the same period 12 months ago.
Moreover, I think that the right hon. Gentleman will agree that we cannot expect to see a fall in food prices in the coming months. We are likely to see further increases not least as a result of the phasing out of the sugar and bacon subsidies to which the Government have already agreed.
We have many new price increases already visible or on the way. The prices of many commodities are bound to continue increasing this year, especially the price of oil. We have a 20 per cent. increase in the price of steel to industry predicted as a result of the Government's agreement that the British Steel Corporation shall assimilate its prices to those laid down in Common Market rules. We have the value added tax already creating havoc in our high streets.
On top of that we have the certainty of very substantial increases in the housing component in the cost of living largely as a direct result of the Government's own policy, with rent increases of up to 50p a week for council house tenants coming in two weeks, with swingeing rate increases already under way and with an increase in mortgage payments of about £1 a week for mortgage holders.
This is a very serious outlook for the ordinary man and woman. But it is also one which is very serious for the right hon. Gentleman's policy. His phase 2 policy, which came into operation only 10 days ago, assumes that earnings will go up only 8 per cent. pre-tax during the coming year. That will not be enough to cover the increase in the cost of living which can now be confidently predicted. This means that millions of people in this country, particularly poorer people, will get no increase at all in their real living standards this year, and for many of them there may be an actual fall in standards.
4.0 p.m.
This conclusion is reinforced by the answers given by the Chief Secretary to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) the other day,
 

because the answers he gave to Written Questions showed that if the average rate of growth in recent years continues up to 1977 there can be an increase in private consumption of only between 7 and 8 per cent. over the next four years, an average annual increase of something under 2 per cent. I hope that the Chancellor of the Exchequer will clear up the confusion into which we have all been thrown by the Chief Secretary's statement on Second Reading only a week ago, that the 5 per cent. increase in living standards, which he claimed the country had enjoyed over the first two years of Conservative rule, will be continued in the future—or that, to quote the words of the Prime Minister, the startling increase in living standards, he claimed, "was no mere flash in the pan". For it seems to me that the figures I have quoted—and if I have got them wrong I am sure the Chancellor will tell me where they are wrong—are quite inconsistent with this boast, unless of course the Chancellor is now preparing, as some newspapers suggest, swingeing cuts in public expenditure.
Is that the case? We are always being told about this but we are never told whether it is so. The Secretary of State for the Environment told the House the other day that he is to find £15 million, for subsidies for mortgage payers, from elsewhere in his budget. We listened with vigilant attention to his speech yesterday for some indication where that cut is to be made but were given no indication whatever. The House and the country need an answer to this question because the success of the prices and incomes policy depends on the answer, and the success of that policy is essential to Government policy in every other field of the economy
As the Chancellor knows, our complaint about the Budget on this side of the House is that it does nothing to assist the success of the Government's counter-inflation policy. On the other hand, it does a great deal to make its success more difficult The Chancellor may pride himself—if that is the right word—on the success of the standstill in earnings, and he can accept Mr. Hugh Scanlon's statement about this in the spirit in which it is offered. I dare say that the Chancellor may find that phase 2 of the policy over the next few months is broadly successful on the earnings side. But as the Government have so often made clear, in the autumn we move
 


to a phase 3 policy which we have been robustly reminded, against foul imputations to the contrary, will not be tougher than phase 2 will be but more flexible and more relaxed than phase 2.
The problem that the Chancellor has created for himself by delaying a decision on the Budget judgment until the evidence is clearer is that if the gamble turns out to be mistaken and he is obliged, in the autumn, to impose big increases in taxation, or big cuts in the social services, which might then be the case, he will be doing so at a moment when he has to rely far more than he has in the previous 12 months on the good will of ordinary men and women in this country to make his counter-inflation policy work. There, as I tried to suggest in the Budget debate, is the danger of the rather complacent attitude which the Chancellor has taken so far to the economic indicators.
I would put it to him that in this situation, where otherwise the cost of living is to rise at least as far as earnings, and earnings are starting off six months behind a 4 per cent. increase in the cost of living which will have taken place during the freeze, he must do more to control those prices which he can control if he is not to find the whole of his counter-inflation policy collapsing, just as phase 2 comes to an end.
I was in the United States last week and had an opportunity of talking to those who were responsible for the startling success of the American counter-inflation policy on which the British Government have so closely modelled their own policy. I had an opportunity of having luncheon with the President's chief economic adviser just an hour after he had had to tell the Press that in the first month of phase 3 the cost of living had gone up by 2·2 per cent.—and not only food and commodity prices but right across the board—a rate of increase of some 26 per cent. a year.
There is no doubt that those responsible for controlling inflation in the United States are deeply worried about their ability to avoid the explosion which has so often in the past followed a temporary success in controlling earnings, unless drastic and quite unprecedented action is taken in the cost of living field. This is why the President has encouraged the beef boycott and has fixed ceilings
 

to the cost of meat, something this Government have steadfastly refused to do, no less steadfast I might say, than President Nixon's refusal to do it until 10 days ago.
Looking at the problem into which the Government may be moving, the Chancellor's gamble may come off, and I am sure everyone on this side of the House will be happy if it does, because, as my hon. Friend the Member for Birmingham, All Saints (Mr. Walden) said, nobody on this side wants to inherit the kind of situation the Government would leave behind them if their policy were a total failure. The problem is that in this whole field of economic management the Government are in a state of total intellectual confusion and political demoralisation.

Mr. Dennis Skinner: Surely not intellectual.

Mr. Healey: I believe that it is intellectual confusion. Let me tell my hon. Friend how much I admired the presentation of his own budget to the House ten days ago. I have doubts about its contents, but I believe that both sides of the Committee agree that his presentation was excellent and refreshing.
But the trouble is that the Government have been forced to abandon the principles on which they entered office and in which, there is no question, a majority of their supporters sincerely believed. Yet the Government have no confidence or conviction that the new course they have adopted is the right one. The result is that in their economic policy the Government clearly have no fixed sense of direction. Their tax policy, their social policy and their economic policy are all now pulling in opposite directions. The only movements they do make—they rarely last more than a day or two— when we get a sense that the Government know where they are going are those made when their minds have been concentrated by the prospect of some election or other coming along within the next week or two. Then we find the Government shooting off quite rapidly in one direction or another.
Let us take their attitude to the food element in the cost of living, the element which more than anything now threatens to wreck the American Administration's
 


approach to the problem of inflation. The only contribution the Chancellor was prepared to make in his Budget to this problem was to give away £110 million to reduce the price of peanuts and lollipops just at the moment when the Government were increasing the price of school meals, cutting school milk and refusing absolutely to subsidise essential foodstuffs on the ground that they could not do so without rationing. Yet what do we find today? The House was discussing it only a few moments ago. The Government are subsidising the housewife in Omsk and Irkutsk as to 80 per cent. She is to get her butter from us at about 20 per cent. of the cost price and we are to pay the difference to the farmer and to the Community. At this moment, when the Government are cheerfully subsidising the happy Soviet housewife— one can imagine the smile spreading over those chubby cheeks as this cheap butter pours across the Iron Curtain—the Government are still sticking to the rigid line that there can be no subsidy of foodstuffs, because that would distort competition and force them to bring in rationing.
Let us look at the housing problem.

Mr. Nicholas Ridley: The right hon. Gentleman complains about Government expenditure being too high, he speaks in the same terms about money supply, and now he calls for subsidies on food. Could he tell the Committee how he proposes to pay for those subsidies?

Mr. Healey: Yes, certainly I will tell the Committee. I would not have given £110 million to reduce the cost of lollipops, candyfloss and peanuts, which will in no respect reduce expenditure on those goods. It will not help the housewife. It will help only the dentist. Children will still receive the same amount of pocket money, but they will get a little more ice cream or candy floss for it. I would have used that money to reduce the price of essential foodstuffs, one of which is butter.

Mr. J. Bruce-Gardyne: That would not get you very far.

Mr. Healey: It would get me £110 million far—and it would be a wiser way of tackling inflation than was the Govern-
 

ment's decision to reduce expenditure on commodities which damage children's health instead of building it up.

Mr. John Pardoe: Mr. John Pardoe (Cornwall, North) rose—

Mr. Healey: No, I am sorry; I must get on.
To take the housing situation, at the moment when the Government are determined to inflict whacking increases in council rents they have decided to hand out £15 million to the owner-occupier. I have worked out that the Government are paying roughly £4 for every vote they expect to get in the local elections. If I have the figures wrong perhaps the Chancellor of the Exchequer will correct me.
The Chancellor told the House something quite different in his Budget speech. He said that he would meet the enormous Government deficit by borrowing from the private sector at the expense of the building societies and other institutions. In fact this was the way in which he sought to persuade those who complained about his spending money like a drunken sailor and by which he sought to square the circle. Yet the plain fact is that he turned tail at the first whiff of grapeshot. It reminded us so well of how the Government turned tail in respect of their lame duck policy when Rolls-Royce got into trouble.
Does the Chancellor believe in the policy by which he said he would square the circle and solve the problem of Government borrowing requirements this year or does he not? Will he subsidise his competitors every time if failure to subsidise those competitors gets him into trouble with the electorate? If he feels this policy to be so wonderful—we are told that he thought of it in his bath— how does he intend to meet the central problem of economic management which he revealed to us so clearly in his Budget speech?
4.15 p.m.
The fact is that there is now a dangerous gap which has opened between what the Government believe—and here the hon. Member for South Angus (Mr. Bruce-Gardyne) recently expressed the Government's real view far more honestly than they have dared to express it—and the steps which they are compelled to take, because what they believe


is obviously false and because when they follow the path of Tory principle it gets them into electoral trouble.
We all recall so well that the Financial Secretary, for whom we have a certain affection, was recently quite indifferent to these wider political considerations since he occasionally uses the sort of phrases so beloved by the hon. Member for South Angus. We recall his saying on 2nd April that the fiscal reforms the Government are adopting
can encourage people to work harder and management to operate more efficiently. It can reduce discrimination and remove distortion in production and consumer choice …". —[OFFICIAL REPORT, 2nd April 1973; Vol. 854, c. 150.]
I wonder whether the Financial Secretary made this point to the Chancellor of the Exchequer in the bathroom, if he were allowed in, at the moment when the brainwave hit the right hon. Gentleman. This is what the Government really believe but it is certainly not what they actually do.
The Financial Secretary has now acquiesced in a value added tax which covers under half of consumer expenditure, which has been tailored to precisely those social conditions which he told us it was immoral for tax policy to try to meet when he was speaking to us about VAT a year ago. As a result we have adopted a system of VAT which costs the Government 6,000 extra civil servants to police inadequately, which imposes enormous burdens on ordinary people as unpaid tax collectors and which brings in a smaller yield than did the Selective Employment Tax which it is intended to replace.
What the Government have done about VAT is typical of their behaviour over the whole of the economy and their behaviour throughout and since the Budget. All these fine Conservative principles, this dedication to the market economy and the laws of supply and demand, have disintegrated into a sort of nervous opportunism—an opportunism which is so obviously lacking in honesty and consistency that it does not even win the political rewards which are its only justification and objective. For these reasons I shall ask the Committee to divide on this amendment.

The Chancellor of the Exchequer (Mr. Anthony Barber): The right hon. Mem-

ber for Leeds, East (Mr. Healey) concluded by talking about honesty and consistency. Therefore, it might be as well if I were to begin by answering two of his points.
The right hon. Member alleged that the last published trade figures of VAT were affected by industrial action of customs staff. I must tell the Committee that there was no such effect. [Interruption.] The right hon. Gentleman may not have asked that direct question, but he brought it in when referring to statistics about the cost of living and alleged that they were not published at the normal time, That also is not true.
It has become almost the custom in debates on the regulator to range fairly widely over the economic prospects for the year ahead. I agree with the right hon. Gentleman that this is an advantage because it enables the Committee to consider changes in the economy since the Budget and also to examine any new economic indicators which have appeared since.
First, I should like to say a word about the significance and the consequences of the amendment. Clause 3 continues, in what has become almost the traditional form, the Customs and Excise regulator introduced in 1961 by a distinguished predecessor of mine who is still with us but in a somewhat different capacity. The renewal to the date set out in the Bill—namely August, 1974 —in effect keeps the power in being until, in the normal course of events, the 1974 Finance Bill will have received the Royal Assent. It is to be expected that in that Bill the House will give the regulator power a further lease of life. In effect, what we have is a permanent power subject to annual renewal by Parliament. Whatever view is taken of the likely course of the economy, it is right that the existing Treasury power should be kept in being to be used if required.
The amendment would have the effect of making the period for the use of the regulator under the clause only four months long. The power would run from the end of August, when the existing power runs out, until the end of December. After that there would be between seven and eight months, from 1st January to the time when next year's Finance Bill received the Royal Assent,


assuming it contained the regulator provision, during which the Treasury would not have the powers under the regulator.
I entirely agree that in practice a Chancellor would not expect to use the regulator in the early months of the year, because of the approach of the Budget, and that from the Budget onwards there is the alternative, if it is desired to change taxes, of amending the Finance Bill. But, clearly, there could be circumstances in which it might be necessary to act at any time. Therefore, I think that it is right to retain the power, as we have done in previous years.
I turn to deal with some of the points the right hon. Gentleman raised and in general to say something about the prospects for the economy, which are very relevant to the power we seek in the clause. In my Budget speech I said that the central objective of the Government's economic strategy was to maintain a faster rate of growth in national output. At the time of the Budget the indications were that we should broadly achieve an annual rate of growth of output of 5 per cent. over the 18 months to the current half year. The information since the Budget confirms that assessment and confirms that rapid expansion is being maintained. Nothing has emerged since the Budget to suggest that we are not on the growth path shown in the Financial Statement and Budget Report, or that we should not be able to sustain a 5 per cent. rate of growth over the next year or so. I must tell the right hon. Gentleman that without any qualification.
This year I had the benefit of an unusually wide spread of outside advice. Before the Budget The Times recommended that taxation should be increased by £1,000 million. The Economist thought that taxation should be reduced by £1,000 million. While it is certainly true that in the business of economic forecasting there are many uncertainties, one forecast can now be made with complete confidence. It is that The Times and the Economist cannot both be right. Certainly, The Times would take the view that my Budget judgment is more likely to be proved correct than that of the Economist. The Economist would take the view that my Budget judgment is more likely to be proved correct than that of The Times.
Anyway, I have come to a conclusion which is similar to that of many of my predecessors; namely, that the safest thing for me, as for any Chancellor in these circumstances, is to repeat that I stand ready to use the regulator in either direction if it proves to be necessary.
On the evidence now available I believe that we have the resources necessary to achieve our objective of a 5 per cent. growth rate over the next year or so. It is true that unemployment is falling rapidly, and everyone welcomes that, but the total is still too high. It is still above the previous peaks in the post-war period. It is even more above the previous troughs. For example, it is 300,000 above what it was in 1964. It is also important to note that recent studies suggest that there has been no major change in the structure of unemployment over the past decade.

Mr. Ray Carter: Has the Chancellor any explanation for the fact that, whilst it is true ihat unemployment is falling, employment as such is not rising? Why is there such a big discrepancy between the two figures?

Mr. Barber: The hon. Gentleman is probably referring to employment in manufacturing industry. There has been a big improvement in productivity. I think that I am right in saying that last year the improvement in productivity in manufacturing industry, by which I mean output per man, was 9 per cent. It was certainly a post-war record.
I was dealing with the question whether we have the resources necessary to achieve our objective of a 5 per cent. growth rate over the next year or so. It is true that against the unemployment figures there is a high level of unfilled vacancies. Some of the rise in vacancies over the past year I think simply reflects the increasing penetration of the employment service into the labour market. It should not be overlooked that the level of vacancies for last month was still below the levels in 1964 and 1965. The amount of overtime, which has been rising in recent months, is still substantially below previous peaks.
Another important indication is surplus capacity in manufacturing industry. The latest CBI industrial trends survey showed


that the proportion of responding firms working below capacity was much the same as in the first nine months of 1970. I think that the right hon. Gentleman will agree that that was a period hardly noted for its high level of activity.
However, the recovery in industrial investment expected this year is vital. It was referred to in particular by the right hon. Gentleman. Industrial investment should rise sharply and so add substantially to capacity. The proportion of firms in the CBI survey expecting to increase investment in plant and machinery over the next 12 months is the highest ever recorded.
Business confidence, which I agree with the right hon. Gentleman is crucial to investment, is also high.

Sir Harmar Nicholls: I hope that my right hon. Friend will study the sentence the right hon. Gentleman used about the impact of the high cost of borrowed money and the fact that the profit allowed on that money does not encourage investment particularly in small and medium-sized firms. We must find a way to let the hopes of profit justify taking on the burden of necessary borrowing.

Mr. Barber: I think that my hon. Friend and I are at one, in that we would both say that what motivates investment is the belief by a man in industry that if he goes ahead with his capital investment he will have a market in which to sell his goods, that he can sell them, and that he will make a reasonable return on the capital employed.
There is another reason why I believe that confidence is high, as the latest information from the CBI shows. I think that British businessmen do not put much weight on the gloomy predictions of the right hon. Gentleman.

Mr. Heaky: Read The Times and the Sunday Telegraph.

Mr. Barber: Perhaps I may refer not to newspapers but to the actual words used by the right hon. Gentleman last year in the debate on Second Reading of the Finance Bill, when he asked:
 Why should there be any confidence in his "—

that is, my—
 prediction that we shall get faster growth as a result of this Bill? "—[OFFICIAL REPORT, 20th April 1972; Vol. 835, c. 799.]
He had no confidence that this country would grow at a faster rate. He said so specifically, and he was quite wrong. I am sure that he is delighted that he has been proved wrong. He said so in his speech this year. But in the light of that prediction I think that people outside the House will take with a slight pinch of salt some of the rather depressing observations the right hon. Gentleman has made today.

Mr. Healey: Of course I made some false predictions a year ago, as the Chancellor did. I pointed out to the House the other day that he told us in last year's Budget that unemployment could not fall if earnings continued to rise; yet we had the biggest fall in unemployment coinciding exactly with the biggest wage explosion in our history.
I hope that the right hon. Gentleman will address himself to the point I made and the question I put to him about how he will meet a serious balance of payments deficit later in the year. I am not sure that I share the view expressed in The Times, Sunday Telegraph and Financial Times, but those newspapers are widely read by the business community. The Chancellor must take seriously the fact that businessmen take them seriously, and he must not ride off on a single false prediction, which he and I have often made in these debates.
I hope that the right hon. Gentleman will address himself to the question I put to him. Is he prepared to re-state on this occasion the undertaking he gave the House a year ago that he would not in a future balance of payments crisis sacrifice growth to an unrealistic parity?

Mr. Barber: The right hon. Gentleman has made a long intervention. Perhaps I may quote what he actually said last year on another subject, unemployment. [HON. MEMBERS: "Answer."] I will answer the question. The right hon. Gentleman said:
we cannot look forward to any significant fall in unemployment over the coming year."— [OFFICIAL REPORT, 20th April 1972; Vol. 835 c. 797.]
I am quoting from what the right hon. Gentleman said last year to show those outside the House—my hon. Friends


know this perfectly well—that we cannot rely on the predictions of the right hon. Gentleman. It may well be, as any Chancellor knows—and if the right hon. Gentleman ever becomes Chancellor he will know too—that there are certain predictions and forecasts made which do not work out as intended. But it is certainly true to say that on the two main elements to which he devoted a lot of attention, growth and unemployment, he was completely wrong in each case and he will be proved to be held wrong once again.

Mr. Carter: Answer the question.

4.30 p.m.

Mr. Barber: I will answer the question. The right hon. Gentleman says he was misled because I referred to some correlation between incomes and employment. The right hon. Gentleman nods again, and I am pleased that he nods. I hope he will agree with his right hon. Friend the Leader of the Opposition, who has consistently taken the view—and I quote him—that restraint in incomes is our only guarantee of full employment. This is what I said last year, and it is what I say now. This is why we are taking the action we are taking at this time.
The right hon. Gentleman referred to the balance of payments. In my Budget speech I said that much of the deficit on visible trade this year would be offset by the surplus on invisibles. The figures in recent months support this assessment. Over the five months to February, the average deficit on current account has been about £20 million; that is, over the five months to February for which we have the latest figures.
If one were to take action on the dreary pessimism of the Opposition Front Bench, and the right hon. Gentleman in particular, coupled with the Opposition's demand for much higher public expenditure, the inevitable consequence would be a policy of higher taxation. This really is what the right hon. Gentleman is advocating.

Mr. Healey: The Chancellor has continued to suggest that he will answer the question I have put to him on many occasions and, indeed, in my speech on the Budget, as to whether he is prepared to repeat today what he told the House

last year: that he remains determined not to sacrifice growth to the maintenance of an unrealistic parity. He will know that this is one of the anxieties most influencing business judgment at present. Will the right hon. Gentleman answer the question? Last year he was prepared to give this assurance.

Mr. Barber: I have made it quite clear before that there has been no change at all in my approach to growth and the balance of payments. The right hon. Gentleman may like to know that. I assumed he would have taken it for granted. The right hon. Gentleman must not write off all the observations he has made today. I am saying that the House and the country realise that the policy he is advocating would result in very much higher taxation for the people of this country. If he wishes to deny it, let him get up and deny it now. The truth is that he does not rise because he cannot deny it as this is the policy of the Labour Party and this is his policy. It is the only logical conclusion to be drawn from what the Opposition are saying about the economy and what they are advocating by way of increased public expenditure.
The way of the Opposition would once again lead to increased taxation, just as it did before, with all the implications that that would have for the pay and prices policy. The way of the Opposition would once again lead to a much slower rate of economic growth, just as it did before, and a slower rate of growth with all that that would mean for cutting back on living standards.

Mr. Joel Barnett: In view of what the right hon. Gentleman has just said about cutting back living standards, is he telling us he is planning to maintain an 8 per cent growth in personal consumption?

Mr. Barber: In real standards 1 can assure the hon. Member for Heywood and Royton (Mr. Joel Barnett) of one thing. By the time the next election comes, the annual improvement in living standards will be far higher than was the case when the right hon. Gentleman's party was in office and, what is more, it will be far higher than anything likely to be achieved by a Labour Government. I want now to turn to the economic outlook.

Mr. Barnett: Answer the question.

Mr. Barber: Over the next year or so we expect the rates of growth of the different components of demand to be more in line than 1972.
First, there is private consumption. The measures in last year's Budget were designed to boost private consumption in order to stimulate production and reduce unemployment. Consumers' expenditure in the second half of 1972 was 7 per cent. higher than a year earlier. The signs are that consumer spending has continued at a high level. The volume of retail sales was high in January and February, and in the three months to February was 9 per cent. higher than a year earlier. New car registrations, too, remain at a high level. But we expect the rate of growth of consumer spending, while still fast, to moderate over the next 12 months.
The second consideration is the rate of growth of public expenditure, which should slow down in the second half of the year.
Thirdly, with the recovery in world trade and higher domestic output, I expect the volume of exports to rise considerably after having been sluggish last year. There are already signs that the volume of exports is starting to increase. At the same time, the rate of growth of the volume of imports should not be as rapid as in 1972.
On the output side, industrial production in the three months to January was about 6½ per cent. higher than a year earlier. The Committee, I think, will welcome that. The rise in output has been particularly rapid in these months, representing an important addition to the flow of domestic supplies.
Our policies of expansion have also been successful in reducing the total of unemployed by about a quarter of a million since the peak a year ago.
A year ago I said that we were aiming at a rate of growth of 5 per cent. We are now achieving that rate, and we intend to sustain that rate over the next year or so. I believe that we have the conditions to enable us to keep on a 5 per cent. path without endangering our attack on inflation and without putting the balance of payments at risk. That is why, given the twin themes of expansion and the attack on inflation, I decided on a neutral Budget.

Mr. Tam Dalyell: Before the right hon. Gentleman leaves the subject of public expenditure, he seemed to have lost track, doubtless inadvertently, of the question of my right hon. Friend on the £15 million which will be found out of the other expenditure of the Department of the Environment. Can he answer this question and tell us from where this money will come? In particular, will it, as has been rumoured, come from the programme for the cleaning of rivers?

Mr. Barber: The hon. Member for West Lothian (Mr. Dalyell)—indeed, anybody who has been in Government before —knows that within any departmental budget it is primarily a matter for the Minister in charge to decide and announce where the savings will be made. It is, I think, right that we should adopt the procedure that was adopted by the Government of the right hon. Gentleman. I will say without any qualification that the cost of that proposal will be matched by cuts to the same amount in the programmes within the Department of the Environment.
A moment ago I was explaining why, given the twin themes of expansion and the attack on inflation, I decided on neutral Budget. But all forecasting, on which demand-management must rely, is subject to uncertainties. It is possible that the pace of expansion may not be as fast as we expect. It is possible that it may be above the forecast path. That is why I stressed in the Budget speech that, if necessary, I shall not hesitate to act at any time of the year, in whatever direction the economy may require, on expenditure, on taxation or on monetary policy.
In the Budget Statement I made it clear that if our strategy for rapid economic growth is to succeed it is essential for our nation to control inflation. I said that when the Government had laid down definite limits on pay increases it was inconceivable that any Government would agree to a dispute being settled by an offer outside those limits. I expressed the hope that in these circumstances responsibility, moderation and common sense would prevail. That was a month ago. In the past month all the signs are that responsibility, moderation and common sense are prevailing. Not


only was (he pay stand still observed, but we are seeing a growing recognition on the part of trade unionists throughout the country that the substantial pay increases which are available within the limits of stage 2 are fair and that they ought to be accepted.
That was the verdict of the coal miners when the offer which had been made to them was put to the ballot, as it had been the verdict of the gas workers before that. I am sure the whole House will agree that the results of the ballots in those two industries were victories for common sense. We now also have the acceptance of stage 2 increases by the teachers. In fact, the latest figures show that there have already been more than 60 settlements within the stage 2 limits, and as every day passes there are more settlements within those limits. What this shows is an increasing awareness that it would be wrong to take industrial action in defiance of a policy which applies a limit fairly to everyone and must succeed if we are to bring inflation under control.
Against this background, the proposed action for 1st May—May Day—which has been fostered by the Labour Party is now widely recognised as being wholly irrelevant. It is completely out of keeping with the mood of the nation. It is still not too late to call it off.

Mr. Skinner: Some hope!

Mr. Barber: "Some hope", says a member of the Labour Party. Perhaps I should ask the right hon. Member for Leeds, East, since he introduced this debate, whether, in the national interest, he will say here and now that he will recommend that it should be called off. He is a man of considerable influence in the Labour Party—

Mr. Brian Walden: Not if he says that!

Mr. Barber: I have a little more to say on this subject. I think I had better pass on.
With all due respect, and despite all the internal problems there may be, if the Labour Party is so stupid as to press ahead with this ridiculous gesture, I hope that the great mass of trade unionists who have more common sense will join

with those who were always opposed to it in seeking to minimise the inconvenience that it will inflict on the general public. If the Labour Party persists in this brainless exercise and causes yet more discomfort to the long-suffering British public, 1st May 1973 will be one Labour Day it will live to regret.
The Opposition have made out no convincing case for the amendment, and I ask the Committee to reject it.

Mr. Pardoe: Is the Chancellor aware that the best possible way of securing what he wants to come about on 1st May is for the Government to declare it a national holiday? Those who are on strike and say they are on strike will not get paid for the holiday, while those who take the holiday and say they are taking it will get paid.

Mr. Barber: I considered that, but I came to the conclusion that as the event was likely to fail, this was not the occasion to take that action.

Mr. Pardoe: I was rather hoping that some people would get paid for taking the day off.
There are two fatal flaws in the economic policy of the last decade. They cropped up again and again in our last debate and will continue to crop up in all economic debates. First, there was the failure to carry out the planned devaluation in 1964 and, secondly, there was the Government's failure to introduce a statutory prices and incomes policy in 1970.
To make just one political point, if the Liberal Party had held the balance of power, as it will after the next election, both those fatal flaws would not have occurred because we would have forced devaluation on the Labour Government in 1964 and we would have forced a statutory incomes policy on the Conservative Government in 1970.
The country, the Government and to a certain extent the Opposition are all suffering from these basic flaws. The Chancellor of the Exchequer has given us figures of the CBI survey which show that business confidence is only just recovering from the consequence of the failure to carry out the planned devaluation in 1964. It was the tremendous squeeze and freeze which came as a consequence of delaying that devaluation


for far too long that created the havoc in business confidence which caused the collapse of investment.
4.45 p.m.
Industrial relations may now just be recovering from this failure to carry out the planned devaluation in 1964. Industrial relations suffered for a long time, and are still suffering, from the aspirations of working people going ahead much faster than the economy was allowed to go ahead. That is the best possible recipe for national gloom and bad industrial relations. We are, unfortunately, not yet recovering from the failure to introduce a statutory prices and incomes policy in 1970. The present inflation rates show that that is so.
I am concerned not only about those two fatal flaws. They are history, water under the bridge. One can say that they happened and that it is unfortunate. I am concerned that the attitudes which led to those two fatal flaws are still with us. In the hearts and minds of most hon. and right hon. Gentlemen on both sides of the House there is a desire to get back to the good old days of fixed exchange rates and a free-for-all on the wages and prices front. There is a need for a permanent float—if with the crawling peg—which creates a certain stability in place of what might turn out to be anarchy if allowed to go on. There is also a need for a permanent prices and incomes policy.
There are certain questions that I wish to direct to the Government, and they are questions which the Chancellor of the Exchequer has touched on this afternoon and in previous economic debates. He certainly touched on the question of the Government's attitude to what happens when the balance of payments position gets out of hand which was fired at him by the right hon. Member for Leeds, East (Mr. Healey). The Chancellor is a good European, and so am I, but we do not have to go in a headlong rush for monetary union in Europe and acceptance of the French attitude to fixed exchange rates. It would be much better to say that we do not accept the need for a return to fixed exchange rates. We certainly do not want to go back into the tunnel or to have anything to do with the snake. We do not want to have anything to do with the French monetary union until such time as much greater progress has been made

towards a federal Europe and a genuine democratic structure.
The Chancellor of the Exchequer did not answer the question about what happens next time the balance of payments position gets out of hand—if it is not already out of hand, which is a moot point. Business confidence requires a categorical answer to that question. The great majority of business men, whose confidence is just returning, need to know that the Government will not answer the next balance of payments crisis with the old squeeze-and-freeze measures.
The Government seem to want to get out of the ring on the prices and incomes policy. I cannot understand why. I am delighted that they have got into it. I have always wanted Governments in the ring on both prices and incomes. We cannot have full employment, a favourable balance of payments position, growth and stable prices without Government intervention in prices and incomes. So what should phase 3—and I believe it should be a permanent phase 3—be?
First, there is an essential need to insure people against rising food prices— not against all rising prices. It is unnecessary to insure anyone against a rise in the price of colour television sets. But the national psychology is such that it is essential to insure people against rising food prices.
The right hon. Member for Leeds, East made great play of the Opposition's answer on food prices, which is food subsidies. I am not intellectually against subsidies—I doubt whether many hon. Members on either side of the House are —but this question is very much more difficult than the Chancellor made out. It may be easy to talk about food subsidies as gesture politics, but one has to ask, how much would they cost? It is not enough to ask how much this year to stave off the crisis, but how much next year and the year after and for ever, because one thing which is certain about food subsidies is that they are the devil's own job to get rid of. Once they are imposed, they tend to stick.
In Committee on the Counter Inflation Bill we heard the hon. Member for Birmingham, All Saints (Mr. Brian Walden) rather favour open-ended subsidies for food. It may well be that they should


be open-ended, but if the Opposition are to advocate food subsidies they have to be honest and to state clearly how much they are prepared for them to cost. The right hon. Member for Leeds, East did not recognise that when his Government were in power the actual Budget cost of food subsidies was brought down. Therefore there were pressures on the Chancellor of the Exchequer of that day, on the Minister of Agriculture and the whole Labour Cabinet, to get the cost of subsidising food down. There will be pressure on any future Government to do that once food subsidies are introduced.
I agree entirely with the right hon. Gentleman in his remarks about £110 million for sweets. I considered that an entirely foolish idea. But the suggestion made by the right hon. Gentleman would go precious little way towards solving the crisis generally. To do that would probably cost three times as much if it were to have a major impact on the price of food and, in consequence, on wages.
Having said that I do not accept that food subsidies would be the best way to deal with this problem, I think it essential to build into a prices and incomes policy a permanent insurance against rising food prices. I hope that the Government will accept the idea that this is a part of a prices and incomes policy and that before negotiations start on productivity deals and raising living standards everyone will be assured that their income will go up at least by what is necessary to compensate the man with average industrial earnings for the effect which the rise has had on his earnings over the last six months. Even if we had to adjust every six months, it would not be catastrophic. A simple straightforward flat-rate benefit calculation of the effect of the cost of food for the average worker would be easy. Of course it would be paid for not by the Government but by the employer. Food is crucial and once one removed the aspect of food prices from the negotiation one could get down to reasonable bargaining for the future.
Next we have to answer the question, what kind of penalties would one have in a permanent statutory prices and incomes policy? As I have said on several occasions in debates on prices and incomes policy, it is much preferable

to use the fiscal means, to use a tax on inflation and to tax selectively the people who cause inflation whether by outrageous wage demands or by excessive price increases. Such a selective tax by national insurance contributions in the case of wage increases and corporation tax on company price increases would be administratively easy.
The Chancellor said that he believes that growth is possible and that we have the resources for growth for next year and the next two years or so. I should like to know from him or from some other Minister exactly what the words "or so" mean. It is clear from official forecasts that the growth rate in GDP will be much lower than the present level. The Chancellor is right to say that it is going on target now, but we shall be down to something less than a 3 per cent. growth rate within 18 months or two years' time on annual rates.
I believe that we have the resources to continue a growth rate of at least 3 per cent. for about five years ahead— and no one can see further than that. It would be helpful for business confidence if the Government could say that this five-year period is what they are aiming at and that they will aim for it to be certainly over 3 per cent. in the five-year period and over 4 per cent. in the first three years. They should also say that they will never sacrifice that growth target to a balance of payments crisis should it ever arise.
With those few comments on demands to the Government for categorical assurances for business confidence to go forward, I can see no case at all for doing what the amendment asks. If one believes in a planned economy, one believes in giving the Government of the day all the fine tuning they can get their hands on. I should like Governments to have more regulators than those we have at present. I will not vote with any degree of confidence in the Government's economic policies, but I shall not support the amedment.

Mr. David Knox: The speech of the hon. Member for Cornwall, North (Mr. Pardoe) was its usual mixture of good sense and nonsense. I thought the point he made about devaluation in 1964 was very good sense. Indeed, I believe the Labour Party must regret, in retrospect at least, that it did not take that


action. Had it done so, that party might still be on these Government benches.
The hon. Member said that a statutory prices and incomes policy should have been introduced in 1970. I thought that was nonsense, because irrespective of the intrinsic merits in a voluntary or a statutory prices and incomes policy, it was not practical politics at that time. As one who has always believed in a voluntary incomes policy and one who accepts a statutory policy in present circumstances, I do not believe that in June 1970—or at any point in 1970— a statutory prices and incomes policy was practical politics.
I welcome this general debate on the economy at the outset of our discussion of the Finance Bill in Committee. First, I make reference to the regulator. Like the hon. Member for Cornwall, North, I find it difficult to understand what this amendment means. It seems that it would provide a regulating power for about six months but clearly if one wants more sophisticated means for managing the economy one needs it for much longer.

Mr. Joel Barnett: I should tell the hon. Member for Cornwall, North (Mr. Pardoe) and the hon. Member for Leek (Mr. Knox), that it has been a well-known practice for many years to use this means for having an economic debate. My right hon. Friend the Member for Leeds, East (Mr. Healey) did not make the case for the amendment. We are concerned not with the amendment, as such, but with the economic debate.

[Mr. E. L. MALLALIEU in the Chair]

Mr. Knox: I understand that, but why could we not have had a sensible amendment instead of a foolish one? If the amendment had suggested September 1974, or something like that, it would have made sense, but the amendment is absurd as it stands. I have considerable respect for the hon. Member for Heywood and Royton (Mr. Joel Barnett) but the excuse he has advanced was not particularly convincing.
I am a strong supporter of the concept of a regulator. It gives to the management of the economy a greater degree of flexibility. Anything that does that should be welcomed and supported.
5.0 p.m.
In the Budget debate a number of hon. Members talked of the decline in the importance of the annual Budget. I do not regret this decline. I hope that it will continue. I think that it contributes to more flexible demand management. Whatever else we need to improve the standard of demand management, we certainly need greater flexibility. It is absurd to leave adjustments in the management of the economy from one spring to another. This is particularly so when we think of the time lag between the introduction of measures and then-taking effect. There seems no doubt that reflationary or deflationary measures take from 12 to 18 months to begin to bite. If flexibility is further restricted by our being able to take such measures only every 12 months, clearly we can get into serious economic trouble before things can be put right.
I welcome the renewal of the regulator powers this year. I hope that my right hon. Friend will not hesitate to use them, though I suspect that they will not be necessary in the current 12-month period.
Anything which contributes to greater flexibility will, in my view, help to improve the management of the economy —and there is plenty of room for improvement. Over the last 25 years there has been a steady deterioration. I hope that we have now moved into a period when this standard of management will improve again. I do not think that either party can feel happy about the way that things have gone during the past 25 years.
Since the end of the war our economy has been run on the basis of stop-go policies and measures. I am not a great admirer of this system, though I accept that the economy and the level of activity needs slowing down or speeding up from time to time.
The alarming thing about our experience over the last 25 years is that as each stop-go cycle has passed the stop part has got longer and deeper and the go part has got shorter and smoother. The deflationary dip of 1965–67 was longer and deeper than the deflationary dip of 1961–63. The 1961–63 dip was longer and deeper than the 1957–58 dip. The 1957–58 dip was longer and deeper than the 1952–53 dip.
The result has been that on each occasion unemployment has been higher than the previous occasion. We are now in a situation where we have had over 600,000 unemployed for between six and seven years. In my view, unemployment is and has been far too high for far too long.
Investment has been braked back with each stop. After each deflationary period has ended we have found it more difficult to get investment to increase, Britain has lost out against her competitors, and the British people have lost out in terms of their living standards.
In addition, the deficit on current account of the balance of payments has in each boom period got larger. This also suggests that there has been deterioration in the overall management of the economy. The fact is that, as each stop-go cycle has passed, the stop period has become longer and the consequences have become worse, and each go period has been shorter and the benefits have become fewer.
Up until 1960 the fine tuning of demand was, I thought, moderately successful. It now seems to be becoming more difficult to get it right if we are to judge by the practical results of what has been done.

Mr. Bruce-Gardyne: I think that my hon. Friend made a most important comment when he said that up to 1960 he thought that the fine tuning of the economy had been more successful than since. He will recall that it was in 1961 that we introduced the regulator.

Mr. Knox: My hon. Friend has made a perfectly fair point, but I do not think that that is necesarily the reason for the deterioration.
I find it difficult to understand why there should have been this deterioration. The information that the Government have today is better that it was in earlier years. In the 1956 Budget Mr. Harold Macmillan spoke about economic statistics as though it were a matter of looking up last year's Bradshaw. They are still out of date, but they are rather better and more up to date than at that time.
We have a better indicative planning structure today than in earlier years, with Neddy, and so on. These should enable

the Government to manage the economy and manage demand more efficiently. Today we have the means for managing the economy with greater flexibility than at earlier times. I can only assume that the quality of demand management and the way that we have run our economy have deteriorated because the quality of political decisions has deteriorated. At the same time I think that there has been a deterioration in the conventional wisdom as represented by the pundits in the Press.
I do not make these remarks to make any particular party point, because they apply to both the major parties. However, an examination of the Labour Government's record shows that the situation was much worse under them than under the present Government.
I have mentioned that recent experience has been that each "stop" period has got longer and each "go" period has got shorter.
It is alarming that at the present time, only 18 months after the present expansion got under way, there should be a demand for stop or at least for a slowing down already and we should be hearing cries about over-heating. This is preposterous nonsense.
Today there are about 1½ million fewer people in employment than seven years ago. Yet the National Plan estimated that there would be rather more people available for employment today than in 1966. Therefore, it seems that a large number of people who are available for work today but are not in employment are not recorded in the unemployment figures. This hardly suggests over-heating in the labour market.
There are 700,000 people out of work today. By post-war standards that is far too many. It indicates that there is considerable slack in the economy and hardly substantiates the over-heating argument.
In addition, there is substantial underemployment of people at work. This is certainly my experience in industry. It is also the experience of most firms in my constituency with which I have had contact. I know that some are fairly busy, but about 75 per cent. of the firms in my constituency with whom I have discussed this matter still have considerable slack. They tell me that they could


increase the output considerably without engaging further employees. I believe that this is true generally in the country.
I do not think that merchant bankers, stockbrokers or investment analysts and such people necessarily know or understand what goes on in industry. It is not in the interests of the owner of a firm to say to someone of that kind that he has substantial labour slack, because it suggests that he is not as efficient as he should be. I believe that the owner of a firm is likely to say that he is busier than he is; he will not let on that he has under-employment. I believe that when one talks to businessmen, especially about investment, raising money, and so on, they are unlikely to admit that they have this slack. I am therefore very doubtful when City people make claims about overheating in the labour market.
Certainly, in my constituency there is evidence of considerable under-employment of people at work. And, although I am willing to concede that there are labour bottlenecks in the British economy today—this is true of the building industry, but not in general terms—it is a great mistake to argue that, with 700,000 out of work and considerable underemployment of those at work, we are nearing a position of over-heating.
The same is true in terms of plant and equipment capacity. The manufacturing industries, which really count in producing economic growth, have, in my view and experience, plenty of spare capital capacity to increase their output. During the year up to December 1972, the labour force in manufacturing industries was reduced by 2¼ per cent. and output increased by 6¾ per cent. Although detailed employment statistics are always months out of date, the increase in employment that has taken place in the last 12 months has been mainly in the service industries. There is little evidence that there is not considerable spare capital capacity in the manufacturing industries.
Another factor which seems to substantiate that there is spare capacity in plant and equipment has been the sluggishness with which investment has taken off. If industry were operating flat out and had no spare capacity of plant and equipment, the investment boom would have taken off at an earlier point than it has done.
The present sitution suggests that industry is still using spare capacity that it

created in the mid-1960s. My experience of industry supports that. There is still some way to go to take up the slack completely. It is only when it is completely taken up that the investment boom will take off properly.
The argument that the economy is reaching a point where it is in danger of overheating has not been made out. Those who have practical experience in manufacturing industry are not willing to support that argument. I hope that my right hon. Friend the Chancellor of the Exchequer will ignore the clamour which is made in certain quarters to slow down the rate of economic growth. If he were to do that the consequences in the long term for the British economy would be disastrous.
It would be disastrous to start slowing down after a mere 18 months of expansion. It is not enough to continue the present rate of growth for just another 18 months. That would mean that we would have maintained a growth rate of 5 per cent. a year for three years. If we are to establish the confidence of British industry, so that it will invest on a long-term basis, we must go for high and sustained growth for a longer period.
I hope that my right hon. Friend will go for an annual growth rate of 5 per cent. for the next five years. If that happened, it would give industry the confidence to invest and to create more capacity. Who knows, after five years of growing at 5 per cent., having first taken up spare capacity and then created the confidence to undertake more investment, we may well be able to increase the underlying rate of increase in the capacity of the economy from between 3 to 3½ per cent. at the present time to 5 per cent. We might well be able to achieve 5 per cent growth each year on a long-term basis.
Other countries have been able to do so, and I see no reason why we should not do so either. An act of faith is required in order to achieve high long-term growth and to pursue that growth policy in the future. My right hon. Friend is moving in the right direction. I hope that what I have said and what some of my hon. Friends may say will give him the encouragement to go further in future.

5.15 p.m.

Mr. Dalyell: Before the Chancellor of the Exchequer has to leave the Chamber, may I have a word with him on two subjects? I shall be brief, so as to enable him to go to his legitimate business. First, is it seriously argued that the Department of the Environment will somehow manage to find £15 million from its own allocation? That is the worst of all possible worlds. Departments such as the Department of the Environment do some fairly serious planning. Suddenly to say that it must find £15 million from somewhere is a most unsatisfactory way of managing a departmental budget.
Is it true—the Secretary of State for the Environment having said that the £15 million will be found from within the Department—that the head of the Treasury, with all the limelight that is on him in this situation, does not know from where the £15 million will be found? If the rumours are true, and it is to be found out of the wretched river cleaning programme, which, heaven knows, when we consider the Trent and other rivers is urgent enough, the idea of passing it back is the most inefficient way of using resources.
Secondly, REP has not been mentioned but the Chancellor talked about investment and confidence. If we are talking about business confidence in Scotland and in the other regions, REP is very important. Perhaps the money is not so important as the idea of continuity and the danger of being mucked around. The one thing that industrialists in the regions do not want are any more piecemeal changes. Cannot we stick to REP and recognise it as part of the system? In that way we will get continuous industrial growth. To be fair to the Chancellor, I shall now let him off the hook.

Mr. Barber: I am most grateful.

Mr. Dalyell: It is fortunate that the Minister of State is on the Treasury Bench. It was with him that I had correspondence on the use of resources. It is strange that we have not heard anything this afternoon about the public sector borrowing requirement. I should have thought that in any general discussion about the economy and its current state some mention would have been made by the Chancellor of that require-
 

ment. I accept that he quoted The Times and the Economist and said that his judgment came between the two.
But, both newspapers mentioned one problem in common—the critical rise in the public sector borrowing requirement. I link that with a non-vituperative and perfectly serious discussion on the taxation system and the conservation of energy resources. I shall not be long.
A matter that concerns us a great deal is the future of Britain's power programme. It is no good saying, "Let us have a debate on fuel and power." That is not quite the issue. The issue, as my hon. Friend the Member for Birmingham, Northfield (Mr. Carter) knows very well, is that the capacity which will be made available to the generating boards to build up the kind of energy programme that we need in this country will depend on finance. An oil-fired power station is going ahead at Peterhead. There is the likelihood of a 2,000 megawatt station at Littlebrook in Kent, and a 4,000 megawatt station at Killingholme. Those are all oil-based power stations.
This is all happening in a week when there is likely to be a dramatic change in the energy policy of the United States. President Nixon is in the act of clearing the way for the importation of oil from the Middle East into the United States. Hitherto, there have been restrictions in the United States on the import of oil. It was thought that United States home industry had to be helped in every possible way. Now there has been a dramatic reversal of the situation. In the next few years the United States will become importers of oil in a big way. It is in that context, if we are to have a serious discussion on current economic planning, that it is important to focus attention on the money that will be available for investment in the public sector.
What will be available to the Atomic Energy Authority and the generating boards so that they may go ahead with some coherent and thought-out programme? As various Select Committees have discovered, the truth about the British nuclear industry is that because of the shortage of orders it has been impossible to settle on a system in which the bugs can be ironed out. I am referring to the various corrosion problems. It is not a technical problem. My hon.
 


Friend the Member for Swindon (Mr. David Stoddart) knows a great deal about this matter. He knows, as do all of us, that this is a question of a regular supply of ample finance. Technology is no problem provided that one has a regular supply of money in order to make the necessary investment.
Therefore, we return to the question of the public sector borrowing requirements. It is true that it may be dangerous to make a greater commitment in the public sector, for interest rate and other reasons. But if we do not do this, how shall we face up to the kind of energy problem that Britain and Europe as a whole will face, in the very different situation that now faces the United States? Hitherto, energy policy has been really a matter of costs. Yes, there have been various social considerations, such as unemployment and social costs in the mining areas. But now energy policy becomes very much a question of world reserves. It is in that light that an energy policy must be framed.
The general question I raise, on the general debate on the economy, is, what will the nation do about the shortage throughout the world of liquid hydrocarbons? Should we have an economic system which allows us to burn them for the next 15 years, as has been our wont, or should we decide that we have to face up to the fact that, if we do not act as if we were in a crisis situation, we shall have a real crisis in the 1980s and 1990s, or at any rate sooner than we think?
There cannot be an answer today, but markers have to be put down. We have to think in terms of an "energy-added tax" and the way in which the fiscal system can be geared to the conservation of energy. I do not know much about housing policies, but I know that in a total situation such as this we have to think in terms of energy conservation; we must think of double glazing and the building regulations. One cannot take this out of a general context.
Linked with the question of the public sector borrowing requirement is the whole question of future energy supply, which deservedly is now becoming fashionable throughout Western Europe. What thought are the Government giving to a fiscal system which will take into account the shortage of reserves and not only
 

short-term costs as we have known them?

Mr. Bruce-Gardyne: Like the hon. Member for West Lothian (Mr. Dalyell) I want to say something about some aspects of the public sector borrowing requirement. I agree with him that this is essential to our discussions. I hope that he will not think me carping if I tell him that I shall try to relate my comments on the public sector borrowing requirement perhaps rather more directly to the subject of the regulator debate this afternoon.
We were entitled to some explanation from the right hon. Member for Leeds, East (Mr. Healey) of what his amendment is supposed to mean. I hazarded the guess, in a seated intervention, that perhaps the right hon. Gentleman did not know what it meant. But at least, I hope that before the debate is concluded the Opposition will tell us what the amendment is supposed to mean and what it is designed to achieve. That is not an unreasonable request.
I was inclined to think that it was a mistake to hold the regulator debate so soon after the Budget, and much sooner than we have previously held it. However, listening to my right hon. Friend the Chancellor I began to have second thoughts to some extent. He told us a little more about his strategic intentions, to which I shall return shortly. But I pick up what the right hon. Member for Leeds, East, had to say in relation to the Question on 6th April from his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) to my right hon. Friend the Chancellor on the resources table in the White Paper "Public Expenditure 1976–77". I feel responsible, to some extent, for the terms of the reply, because it was I who initially asked the Treasury to provide that information. I am grateful to the Treasury for doing so. But if the right hon. Gentleman is to use information such as that which is supplied in that answer in the way that he used it this afternoon, I cannot believe that it is likely to encourage the Treasury to help us in this manner in the future.
My purpose in asking the Treasury to provide this information and the additional resources table was simply to spread the full range of hypothetical possibilities of resource growth over the period we are discussing. That is all. I
 


made that quite clear at the time and have done so since then. The right hon. Gentleman picked this up and came very near to implying that the low resource growth, which was a hypothesis laid out in the answer to his hon. Friend's Question, had in some sense now been accepted by the Government as a clear indicative possibility. That is not a fair proposition to make from that Answer.

Mr. Healey: The hon. Gentleman must not suggest that it is wrong for hon. Members to use information made available to them in answer to Questions from himself or from anyone else. If he takes the trouble to read again what I said—I have had the advantage of reading it in the last few minutes, as I have been correcting my speech—he will find that I related the implications of the figures precisely to the assumptions on which they were based. What surprised me was that the Chancellor, having been presented with two quite independent arguments suggesting that there would be a heavy fall in private consumption during the coming year, chose not to reply to either of the arguments. This can only justify the suspicions of some of my hon. Friends who believe that the Government are planning for a severe cut in the rate at which private expenditure is rising and a real cut in the living standards of millions of our fellow citizens.

Mr. Bruce-Gardyne: I shall study carefully in HANSARD tomorrow what the right hon. Gentleman said. It seemed that he was arousing expectations that the Government were accepting a hypothesis —very clearly a hypothesis—about a cutback in consumption. My only purpose in getting the table on the record was to have the whole range of hypotheses which seemed possible. I am grateful to the Treasury for that.
On the general subject of the regulator, I have always been very dubious about our wisdom in renewing the regulator. I was fascinated by the comments of my hon. Friend the Member for Leek (Mr. Knox). I believe he was absolutely right in suggesting that our attempts to fine-tune the economy were somewhat more successful in the 1950s than they were in the 1960s. I do not happen to think that they were successful in the 1950s, but I think that in the 1960s they were
 

utterly disastrous. That leads me to the conclusion that perhaps we might be better off without the regulator. However, it is conventional to accept that we shall continue with this rather dubious device for another year. I shall not break convention on this occasison. It has enabled us to have from my right hon. Friend the Chancellor a more up-to-date assessment of the course of the economy. He gave us a number of very interesting indications of his present thinking.
5.30 p.m.
The main point that my right hon. Friend added to our fund of knowledge was that the Government were now thinking in terms of sustaining the present rate of growth in the economy over a further year or 18 months. He assured us that he was not in the least concerned about the possibility of this leading to so-called "over-heating", or demand problems in the domestic economy. He based this on the assumption that, in the months ahead, the rate of growth in private consumption would begin to decelerate, that the rate of growth in public expenditure would decelerate after a few months and that exports would grow and imports tend to stabilise.
If all these predictions of my right hon. Friend are right, life will indeed be rosy in the months ahead. My biggest anxiety, I confess, is about public expenditure. I know, of course, that we have the predictions of this curvaceous development over the years ahead, taking us down to virtually nil growth in public expenditure in the later years of the series of the PESC review. But notwithstanding what Mr. Samuel Brittan told us in the Financial Times yesterday morning, which I am sure we all read with great interest, I do not see to date any clear or convincing indication of any forthcoming reductions in public expenditure.
Indeed, I thought that last week another very modest increase was announced— and we have yet to hear from my right hon. and learned Friend the Secretary of State for the Environment where the offsetting economies in his Department are to come. He was asked that specific question and he specifically gave no answer. So I should like to know a little more about how soon the rundown in the rate of increase in public expenditure will
 


occur and where precisely the cutbacks or reductions are to be expected.
My right hon. Friend did not tell us much more today about the condition of monetary policy. I received a Parliamentary Answer from the Minister of State on the question of the money supply only yesterday. I asked:
… what was the increase in the money supply, in the latest period of three months for which figures are available, expressed at an annual rate and measured by the M3 and Ml definitions and by reference to the increase in notes on circulation with the public respectively; and whether this was in accord with the Government's monetary policy.
His reply is worth quoting for its poetic beauty:
In the three months to mid-February Ml increased at an annual rate of about 11 per cent. I do not consider that the recent three months' figures for notes and coins in circulation with the public and for M3, expressed at an annual rate, are a reliable indicator of the direction of monetary policy though, for what they are worth, they are 18 per cent. and 40 per cent. respectively.
Then comes the touch of poetic beauty:
Clearly, were these figures meaningful they would not be in accord with the Government's monetary policy."—[OFFICIAL REPORT, 9th April 1973; Vol. 854, c. 196–7.]
That, I thought, was very attractive.

Mr. Robert Sheldon: Might it not be that it is because they are not in accord with the Government's policy that the Government do not consider them meaningful?

Mr. Bruce-Gardyne: The hon. Gentleman should not make a suggestion like that. I would not dream of pursuing it.
I hope that my right hon. Friend's attention has been drawn to the comments by W. Greenwell in their latest monetary bulletin. They make a very good point. After discussing the shortcomings of M3 and,also Ml incidentally—they do not entirely share the Minister of State's high estimation of Ml—a high estimation which varies occasionally when Ml starts playing traitor and showing a higher rate of growth than M3—they say in their bulletin:
… the other measure of ' spending money ' notes in circulation with the public"—
which they put at 16½ per cent. on the latest figures, and not my hen. Friend's 18 per cent.—
would appear to be the best indication at present available of the true monetary growth.
 

This is a serious view from a serious source, which might be worth further consideration by the Government.
I should like to hear the Government's intentions about interest rates. It is here that this debate can serve a useful purpose. There is a certain amount of contradiction—perhaps that is too harsh a word; say "uncertainty"—in the noises emanating from the portals of Whitehall on the subject of the outlook for interest rates.
I should like to start by quoting in evidence the Chief Secretary, who, in our debate on the Counter-Inflation Bill on 27th February, talking about competition and credit control, said:
I can respond to the requests of my hon. Friends the Members for Oswestry … and South Angus by assuring the House that it is not our intention, by resorting to quantitative restrictions, to throw away the striking gains in the efficiency of the financial sector that have been achieved under the new arrangements. That would be a retrograde step,"—
this is the important point—
and one that would not avoid the need for high interest rates if an excessively rapid growth in the money supply is to be reduced." —[OFFICIAL REPORT, 27th February 1973; Vol. 851, c. 1345.]
That was my first piece of evidence. My second was my right hon. Friend's Budget Statement, in which he said, as has often been pointed out:
With real demand expanding, the objective must be to prevent a large borrowing requirement from leading to too rapid a growth of money supply."—[OFFICIAL REPORT, 6th March 1973; Vol. 851, c. 252.]
Not, perhaps, a very precise statement. However, it was accompanied, in the March Quarterly Bulletin of the Bank of England by a very precise statement:
The calls for Special Deposits have helped to prevent the Government's expenditure adding undesirably to bank liquidity; and the strong rise in interest rates should help to reduce the demand for money and so induce a somewhat slower rise in the money stock.
My next piece of evidence is the Minister of State, speaking in the Budget debate on 8th March, when he said:
Prices have adjusted quickly and the higher structure of rates established in the markets should enable the authorities to sell stock on the scale required."—[OFFICIAL REPORT, 8th March 1973; Vol. 852, c. 722.]
But item number four in this evidence —this is the one which concerns me— came from the reports of the graphic
 


comings and goings in Downing Street of the building societies' leaders last week. In the Evening Standard of Wednesday 4th April, under a heading which had something to do with the building societies being left on their own, and which was corrected within hours, Mr. Robert Carvell wrote:
… Mr. Barber told Building Societies Asso-cation chiefs that the current crisis "—
in mortgage rates—
is likely to blow over and they ought not to take panic action in coping with short-term difficulties. The inference was that there was a Treasury expectation of falling interest rates generally in the next few months.
Was that inference justified? If it was, the implications for monetary policy against a background of the assumed borrowing deficit which we face this year are remarkably disturbing.
I have heard suggestions from Government circles, and not the outermost Government circles, that interest rates are far too high and are almost to be treated as a treasonable situation in the light of phase 2. We need a rather clearer statement here and now of the Government's expectations and intensions for interest rates in the months ahead if they are to fund their borrowing requirement.
I conclude with one final piece of evidence. I believe, unlike some of my hon. Friends, perhaps, and certainly unlike hon. Members opposite, that, at the root of our problems up to now, during the period of this Parliament, and the root of our problems in the months ahead, has been and is the excessive rate of growth in public expenditure.
I would like to draw the attention of my hon. Friend the Minister of State to the statement of my right hon. Friend the Chancellor of the Exchequer in his official statement on public expenditure which he made in the autumn of 1970. He then said:
The effect of the policies which have been applied in recent years is all too clearly seen in the way national income has been used. In 1964, the public sector accounted for 44 per cent. of the gross domestic product. By 1969, that proportion had risen to 50 per cent. —exactly half our national output. In our view, this trend is unacceptable."—[OFFICIAL REPORT, 27th October 1970; Vol. 805, c. 38.]
I entirely agree, but, as my hon. Friend would agree, this has been a trend which has been continued.
My hon. Friend must believe me. The latest figures which I have from my hon. Friend the Chief Secretary, which he gave in a Written Answer on 6th April were as follows:

"Total public expenditure expressed as a percentage of gross domestic product was as follows:







Per cent.


1964–65
…
…
…
…
43·2


1970–71
…
…
…
…
50·3


1971–72
…
…
…
…
49·9


1972–73 
…
…
…
…
 50·8

The percentage for 1973–74 is unlikely to differ significantly from that for 1972-73, although the estimate at this stage suggests that there might be a small reduction."—[OFFICIAL REPORT, 6th April 1973; Vol. 854, c. 175.]

The Minister of State, Treasury (Mr. John Nott): I shall be speaking later in the debate, but I wonder whether my hon. Friend will agree that he also received a letter from the Chief Secretary which produced figures on a rather different basis. These figures were of public expenditure on goods and services, which showed that the trend had gone the other way.

Mr. Bruce-Gardyne: The figures which I was quoting in that last series which I gave are precisely the figures that my right hon. Friend the Chancellor of the Exchequer was quoting in the autumn of 1970 and he said that the trend was unjustifiable. The trend was unjustifiable in 1970 and is still unjustifiable today.

Mr. A. E. P. Duffy: The hon. Member for South Angus (Mr. Bruce-Gardyne) cannot accept all the claims of the Chancellor, nor share in all his confident predictions, and neither can I. I hope he will allow me to touch on some of them later, but I wish to take issue with one of his points at the outset.
The hon. Member repeated the Chancellor's description that this Budget was neutral, but he must acknowledge that it is neutral only in a technical sense, in relation to the overall balance of Government spending and revenue. As my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) said on Second Reading, it is far from neutral. As my right hon. Friend the Member for Leeds, East (Mr. Healey) reminded the Committee yet again this afternoon, in
 


deciding to let the economy go on expanding at over 5 per cent. a year the Chancellor is taking a decided gamble. How much of a gamble turns, as most commentators seem to have agreed in recent weeks, on the annual rise in productive capacity. The continued expansion must put a strain on that capacity. It may, perhaps sooner than many of us wish to see, show signs of overheating; that is, if the slack runs out sooner than the Chancellor expects.
The hon. Member for Leek (Mr. Knox) drew on his local experience in repudiating any suggestion of overheating. I found that difficult to accept. I have taken the trouble in the last few days to inquire of my local employment exchanges to find out the state of the local labour market. The experience in Sheffield and district is that there is already an acute shortage of certain categories of labour. As my hon. Friends would expect, these are all shortages of craftsmen, although it is remarkable, at this late stage in the post-war period— throughout which we have all been agreed on the need for retraining and retooling the labour force—that we should still be acutely short of key workers in our economy.
5.45 p.m.
I was much interested in the Chancellor's second claim, that capacity is as great now as it was just a year ago. It is difficult to dissent at this stage from his further and all the more important claim that the economy will proceed comfortably along its growth path over the next year or so. Unfortunately, as my right hon. Friend the Member for Leeds, East said, there must be an element of gamble involved, and that gamble may be precarious.
Another sense in which the Chancellor is surely taking a gamble is his treatment of the balance of payments. He has repeatedly emphasised that our balance of payments will not henceforth inhibit growth, and by floating the pound last summer and resisting pressures to re-peg sterling prematurely he suggests an awareness of the need to avoid the errors of 1961 and 1966. He recognises that there can be no further depreciation of sterling if the Government's counter-inflation policy is to succeed. Already he must be aware that higher import prices have seri-
 

ously jeopardised the prices side of stage 2 and that it has not therefore developed according to plan. He must also be aware that we on this side of the House are not wholly convinced that he will be able to keep his nerve and maintain his pledge.
The Chancellor, given his reluctance, which he displayed yet again in answering my right hon. Friend's questions, is presumably prepared to allow the balance of payments to deteriorate over the next year or so, but to defend the present sterling exchange rate surely means borrowing abroad and using the ample official reserves. In this way he doubtless seeks time for the counter-inflation policy to succeed on the basis of a continuing rise in output and in living standards. We are interested in his claim that under this Government living standards will be higher, but he can be in no doubt that a condition of the success, or certainly the maintenance, of his counter-inflation policy is a rise in living standards, but also without any intensification of inflation which he would undoubtedly get if there was a further sterling depreciation.
It seems that the counter-inflation policy is being given overriding priority. All other problems of economic management are postponed for solution in 1974, by which time the Chancellor hopes that inflation will be under control, but, as my right hon. Friend reminded him, he will be coming dangerously near at that point to jeopardising his own party's election timetable.
The twin objects, then, of the Government's economic policy are a 5 per cent. annual growth rate and control of inflation. I assume that hon. Members on both sides of the House will join the Chancellor in hoping that the Government's gamble will pay off. It will be hoped that such all-out expansion will secure the prize of a successful counter-inflation policy, but we must keep repeating that the counter-inflation policy must be rooted in popular consent. I have no doubt that if my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) catches your eye, Mr. Deputy Speaker, he will later spell out as only he can just what that means for the industrial worker, and that overheating and demand pressures on prices will not develop before mid-1974.
As the Economist pointed out on 10th March this year
Treasury forecasters have not had a particularly good track record since budget forecasts have been published … all the forecasts to date have been wrong".
The hon. Member for South Angus seemed to share that pessimism. One of the major doubts over the prospect of achieving a sustained rate of growth is the question of how rapidly industry will start to run into production bottlenecks as a result of a slow rate of investment during the last two or three years, despite the Chancellor's claim this evening about capacity.
The Chancellor's assurance last month that the present system of incentives in industrial investment will continue at least until 1978 is important especially for those who represent constituencies in assisted areas. It will confer upon such areas a much-needed continuity and stability and will enable them to underpin regional development at a critical time. Furthermore, the latest survey of investment intentions published at the beginning of the year by the DTI showed that a surge in investment was on the way, but that it would probably not reveal itself until much later on, and it was suggested that this might not happen until next year. That must throw into doubt the Chancellor's claim that capacity can sustain growth and, therefore, throw doubt upon his growth target.
I do not doubt that the Chancellor is right when he says that industry wants to invest because, as he says, it is vital. The latest CBI trends showed a remarkable revival of optimism and expectations of spending. But what will be the effect on that optimism of record interest rates? Moreover, what will be the effect of continued industrial unrest if consent for his counter-inflation policies is not forthcoming? What will be the effect for controls on prices and profit margins and for that net borrowing requirement which disturbs some of his hon. Friends.
Thus, the evidence is not overwhelmingly on the side of fast and sustainable growth. At this point I wish briefly to quote Mr. Patrick Hutber in the Sunday Telegraph of Sunday week. He is in touch with City opinion in a way that I am not, and he related the viewpoint that he had found to be most widely held in the City a week or so ago. He said:
 

It is the belief that after this year's Budget the Government doesn't really deserve to get away with it. To this school of thought it is that £4,600 million borrowing requirement, and the state of the gilt-edged market, which are really ominous.
Confidence may not be as broadly based as the Chancellor claimed. Even demand may falter. We may know a little more about that when we discuss VAT, but the Economist cast doubt on this only last week. Prices have been rising faster than wages under the freeze and this will start to show up in consumer spending. Just what consumer spending has been doing in the last week only those with contacts with the retail trade will really know, and they must admit that they were unprepared for it. A worsening balance of payments may well constitute a further drain of demand out of Britain.
The Treasury is already rumoured, as my right hon. Friend mentioned—and no doubt this will hearten the hon. Member for South Angus—to be reverting to its traditional rôle of watchdog and to the cutting back of public expenditure. We are entitled to ask where this would happen, in which Departments. If the Departments are the Department of the Environment and the Department of Trade and Industry, will the Chancellor remember what I said a few moments ago about the need to sustain regional policy?
With the greatest good will for the Government's priorities, the targets for growth and counter-inflation, I do not believe that either will succeed if there is renewed confrontation. I am sorry, therefore, that the Chancellor did not take this opportunity in the Budget of providing a certain measure of tax relief that could have had a sufficient psychological impact on his targets, especially of counter-inflation, to reduce the possibility of confrontation and to make more likely a wider basis of consent.

Mr. David Madel: I agree very much with what the hon. Member for Sheffield, Attercliffe (Mr. Duffy) said in the first part of his speech when he remarked on the shortage of key workers in certain parts of industry and on the need for a bigger programme of retraining and a fuller debate in the House on the matter. Such a debate would not be possible under the terms of the clause because we would be unable to go into sufficient detail.
The debate has followed traditional lines covering subjects varying from United States policy on oil and coal to why the Conservatives did not introduce a statutory freeze in 1970. Well-ridden hobby horses have had another good go round the track this afternoon.
There were two points which the Chancellor made about present economic conditions which were more important. First, he pointed out that the amount of overtime being worked was not at full capacity, although whether we should work as much overtime as we do is another question. I feel that the question whether it is socially desirable that more overtime should be worked in certain industries could be looked at. He also said that spare capacity was now roughly what it was in the first nine months of 1970, which was not a particularly happy time for economic expansion. Perhaps that underlines the point that the government might have gone for earlier reflation in the summer of 1970.
The Chancellor mentioned that unemployment was too high and must be brought down. Again, I hope that the Government are doing sufficient to get more people to go into what might be called the social services industry. There is an increasing demand for more people to be employed in these Government services.
The right hon. Gentleman for Leeds East (Mr. Healey) mentioned two points when discussing costs which are likely to be incurred by the average person in the next six to eight months. First, he mentioned rates. Whoever runs the town halls next year will still be faced with the antiquated problem of rates. Unless we quickly get a new form of local government finance, the Treasury will face an open-ended commitment on the rate support grant and ratepayers will be committed to everlasting increases in the rates. In view of the local demand for more expenditure on the social services, education and all the things that local authorities have to finance, it is not possible to continue with the present system unless there is an open-ended cominitment on the rate support grant or unless the Government are prepared to stand back and let rates rise year after year. It is vital that some of the points which are in the Green Paper on local government finance are brought forward
 

in a Bill and that there is some other form of local taxation to finance the rates.
The right hon. Member for Leeds East mentioned the cost of oil. We are here discussing the regulator. I think I am right in saying that the regulator has never been used downwards since it was introduced in 1961. It has nearly always been used to increase taxes. Every Chancellor says that he will use it in whichever direction he thinks is necessary. With the inevitable increase in oil prices, there is a case for using the regulator on the price of petrol fairly soon. The price of petrol reflects itself in a whole range of consumer goods and services, and as the Chancellor has said he would not hesitate to use it he might consider giving a tax cut on the price of petrol.
The Chancellor also said that he was happy with the settlements in the gas and coal industries and that the teachers had accepted stage 2. He said that we were now well set for stage 3. This is the nub of what I want to say. We are putting a tremendous burden on the Pay Board. The Government are saying "over to you" for the Pay Board to solve these difficult questions on the level of pay settlements. The country accepted the standstill and stage 2 because it was severely frightened by the rate of inflation leading up to the end of the calendar year 1972. But, from speeches that have been made and judging by forecasts, we can see that the rate of inflation had abated considerably since last November. The same mood of fear about inflation in the economy will not be with us in the autumn when reports start to come through from the Pay Board, and we must remember that it will be working with a background of rising raw material prices—world commodity prices which are beyond the control of this country.
6.0 p.m.
First of all, I should hope that, as the Counter-Inflation Act provides, the Pay Board and the Price Commission will soon amalgamate. In my view, it makes sense to bring the two bodies together, whatever it may be called—Prices and Incomes Board perhaps. The main thing is that the Government have committed themselves to letting an independent body try to work out the level of pay settlements, and it makes sense to bring the two bodies together, and it is going to work with a background, according to
 


a recent poll, in which 70 per cent. of the people in the country feel that the present share-out of wages is unfair.
Secondly, in my view it must concentrate as much on hours, conditions of work, holidays and sick pay as on the actual level of pay settlements. Little, or at any rate not enough, emphasis has been placed on these matters in previous wage negotiations. If it does this and explains to people the nature of many jobs that are done, it will have a better chance of succeeding.
Thirdly, it has got to do something about geographical pay settlements. Most firms, and the Government themselves, do not pay sufficient regard, in my view, to the high cost of living in the South East compared with the rest of the country. The Burnham Committee gives a London allowance, and that is a source of aggravation and a matter which is going to the Pay Board. It does not make sense to confine that London allowance within the Greater London area. It should extend to the whole of the South East.
If there is a failure of agreement on incomes, the Chancellor's growth rate plan will be wrecked. It is absolutely essential that the expanded Pay Board should succeed in changing the climate of opinion in this country. We have spent too many years on both sides of the House of Commons running each other down, and throughout the country, on pay settlements, arguing who is getting more out of industry, who is putting his or her back into making the economy expand.
If we have a failure on incomes in the autumn there will be a serious weakening of the social fabric of the country. But, given that the Chancellor will stick to growth and the Pay Board has a climate of abating inflation in which to work, I hope that by the autumn voluntary pay settlements will come about and we shall avoid a series of industrial collisions such as we have had in the past 12 to 18 months. Nothing would deter overseas investors more than a series of industrial disputes in this country. That is the sort of thing that will make us fail in the 5 per cent. growth rate—the fears of industrial disputes after October.

Mr. Carter: The hon. Member for Bedfordshire, South (Mr. Madel) specu-
 

lated on what the merger of the Price Commission and Pay Board might receive as a title. It might well end up being called the Costs and Emoluments Board, but I think Prices and Incomes Board is probably the last title it will receive, although I am quite sure the merger will come about and the resultant body will get some title or other.
Nothing much has been said so far in the debate about VAT and its introduction. This is rather surprising, because there is a storm of public indignation about the way VAT has been introduced and the way in which the changeover is taking place. My postbag has been full of letters from people, housewives in particular, complaining about shopkeepers profiteering at their expense. We read in the local Press about indignant people who find that in the changeover from one tax to another exorbitant profits are being made.
I believe that this is due in part to the fact that the Government have not gone well enough about their job of informing the public of the way in which VAT is going to change the taxation structure, or how it is to be introduced, and this applies particularly to my city, Birmingham. The Treasury has carried out a national campaign of advertising, placing advertisements in national newspapers and various other media. Unfortunately, the principal newspapers of Birmingham—the Birmingham Evening Mail and the Birmingham Post —have been left out of this. I suspect that other newspapers of this kind in other provincial cities up and down the country have not received the kind of advertisement that has been placed with many national newspapers. This affects people in such cities. In the case of Birmingham, the Evening Mail is read by more people than is any other single newspaper in circulation in the city.
I refer in particular to the lower-income groups. These are the people who are complaining most about the changeover to VAT. It would seem—this is my supposition—that they are unable to question sufficiently intelligently the way the changeover has taken place and the new prices that are being charged simply because they have not been informed through their local newspapers. The Birmingham Evening Mail is probably
 


for many people the only newspaper they will read in the course of a day.
In a parliamentary answer to a Question from my hon. Friend the Member for Colne Valley (Mr. David Clark), the Financial Secretary to the Treasury said that advertisements of this kind were placed on a purely commercial judgment. I would ask him, as the campaign is still under way, to look once again at the manner in which these advertisements are placed to see whether or not provincial papers such as the Birmingham Evening Mail and possibly the Manchester Evening News are getting their fair share of advertising, because this affects many millions of people in city areas up and down the country.
What has also become clear in the course of the past week is that the weights and measures departments in town halls—

The Financial Secretary to the Treasury (Mr. Terence Higgins): I think it right to point out, and I hope I carry the Committee with me, that the tradition of this debate which has been established over a great many years now, at any rate since 1964 or so, has been that it should be a debate on the regulator, the purpose being to discuss the general economic situation. I think I am right in saying, Mr. Mallalieu, that that is the basis on which the Chair has normally exercised its discretion in these matters. It is not for me, of course, to say anything one way or another on the issue, but I think I should point out that there are subsequent debates on VAT, and so on. I would not think that my hon. Friend would expect in this debate to reply to the kind of point which the hon. Member is making now.

Mr. Carter: All I can say is that if that has been the trend in the past a sufficient number of people had departed from it prior to me for me to believe that perhaps I was in order in raising this point and in raising others which I intend to raise. The debate so far has been very wide-ranging indeed.

Mr. John Biffen: Try the butter mountain.

Mr. Carter: Well, butter will no doubt crop up. I am sure it will not be left aside. It is too big an obstacle either
 

to avoid or to fail to recognise. I shall not deal with it, but I have another important point after VAT which I have no doubt the Minister similarly will not be too pleased to have to deal with.
I ask the Minister, on the point I raised, particularly as he was the Minister who gave the answer to my right hon. Friend on newspaper advertising, to look at it once again because I do not think that most newspapers, and through them the people who read them, have been too well served by the manner in which the advertising campaign has been carried out.

Mr. Neil McBride: Does my hon. Friend recall that a weights and measures inspector on television declared that they had received their final instructions only two days before the operation of the tax, and would he agree that this is a failure on the Government's part?

Mr. Carter: I am sure that is a failure of Government policy. Unfortunately, I did not see the television programme although I have evidence in the city of Birmingham that the weights and measures department has not got sufficient staff to cope with the many and varied complaints that are being put to it. I will not take this point any further because, clearly, on the basis of what the Minister has said, he is not prepared to answer this kind of point. Perhaps we shall have an opportunity in Committee upstairs to raise this once again, when he will be rather more prepared.
There is another subject about which the Financial Secretary probably did not expect any question to be raised, and that is motor car insurance premiums. I feel that it is especially germane to this debate—

Mr. Higgins: Mr. Higgins rose—

Mr. Carter: —though, judging by the look on your face, Mr. Mallalieu, you do not agree, and, clearly, the hon. Gentleman has doubts as well. I wonder what they are.

Mr. Higgins: I hope that I carry right hon. and hon. Members on both sides of the Committee with me when I remind the hon. Gentleman that the tradition which has grown up over the years is to have a wide-ranging debate


on the general economic situation. Both parties, in Opposition and in Government, have welcomed that. I hope that the hon. Gentleman will allow me to say that if it is possible to raise any subject under the sun, that is better done during the Consolidated Fund Bill debates rather than in this debate.

The Second Deputy Chairman (Mr. E. L. Mallalieu): Order. The details of the working of a specific tax hardly come within the scope of this debate. Certainly the generality of the economic situation does.

Mr. Carter: One of the great arguments in favour of tradition is that it is dynamic and is constantly evolving and changing. If I add just a little to that tradition today, I am sure that it will not destroy either the content of this debate or that of future debates.
When I refer to motor car insurance premiums, I am not referring to taxation but to matters which arise out of the Counter-Inflation Act and in part out of last year's Finance Act. They were referred to by my right hon. Friend the Member for Leeds, East, and the Chancellor of the Exchequer himself has made reference to the Counter-Inflation Act.
My point about motor car insurance premiums arises directly out of the Counter-Inflation Act. I should not have thought it was straining the traditions of this debate or the general rules of our proceedings to raise this matter, especially as I have tabled parliamentary Questions to the Secretary of State for Trade and Industry and have received entirely negative answers on a matter of great public interest. As we have a Treasury Minister with us today who is responsible for Government economic policy, I feel that we might perhaps get some response from him, even though his attitude so far has given no indication of that.
Last week the major motor car insurance companies one by one announced in the Press that they had applied to the Government for increases in their premiums. Figures quoted ranged from 5 per cent. to 20 per cent. Under the Counter-Inflation Act additional powers were devolved upon the Secretary of State for Trade and Industry in respect of motor car insurance premiums. The Act
 

provides for the right hon. Gentleman to examine any applications for increases and to decide whether they are justified. In parliamentary Questions to the Secretary of State for Trade and Industry I asked how many companies had applied for increases, what was the nature of those applications, and what he intended to do about them. I received from the right hon. Gentleman an entirely negative answer.
When we were considering the Counter-Inflation Bill in Committee hon. Members were assured time and time again that if we had Questions on price increases or pay awards, whether they were with the Price Commission, the Pay Board or the Minister, we could table Questions and would receive answers from the Ministers responsible. It is not good enough for the Financial Secretary to tell me today that I am stretching the terms of this debate. I have already asked the Minister responsible for answers which I was assured in Committee that I would get, only to find that I have not been given them. For that reason I raise the matter again today.
6.15 p.m.
I can assure the Minister that if we fail to get answers to Questions of that kind we shall seek every opportunity that we can to raise these matters in other ways. I make no apology for doing so today even though, apparently, I have caught the Financial Secretary unawares. In view of the nature of the legislation that this House has passed, I believe that we have to be extremely watchful. My fear is that, applications having been made to the Secretary of State, decisions will be taken during a parliamentary recess. That is not good enough. If it is possible for the Press to have available to it all the information that I have mentioned, why cannot it be given to hon. Members?
I hope that the Financial Secretary can give us some answer on this matter. I appreciate that it is not strictly within his purview, but it concerns the Government's economic policy for which he is responsible and with which he can deal.
I turn now to a matter which is perhaps within the traditions of this debate. It has been referred to already, although it may be that it was out of order then. It concerns investment. I want to compare the present investment situation with
 


the rosy economic picture which the Government constantly put before our eyes. It is a staggering fact that in every year of this Government's tenure of office investment has fallen as a percentage of the GNP. This is a unique figure in British economic life since the war. I do not know how the Government can declare that the British economy is running at full steam, at maximum efficiency and with the future assured. If we are to have any assurance at all about the future, it must be out of the fact that investment is rising and providing us with the plant, equipment, machinery and factory space which can provide the jobs, the opportunities, the products and hence the markets of the future. I do not believe that the investment picture that we see gives us any hope for the future.
In an intervention 1 referred to the present employment position. It is true that unemployment is falling. Looking at the statistics, clearly it is equally true that employment is not rising. I do not know the reason for that contradiction. It may be that the Government do not know. I am sure that there are hidden factors at work. For example, it is clear that fewer women are at work today compared with the position four or five years ago. This has something to do with equal pay. More probably it is because the jobs which they used to do are no longer available since men who have been unemployed for long periods are being given these employment opportunities. The jobs are lost to women. It means that the employment picture, too, gives us no great hope for the future.
I wonder what the Press and the establishment generally would have had to say about a Labour Government if their economic performance was turning out in the way that the present Government's is. We still have massively high unemployment and falling investment. The pound can by no means be described as strong. We are running into a balance of payments crisis, and still we have skyrocketing inflation. To me, all that does not add up to a picture of sound economic performance. Yet only this afternoon the right hon. Gentleman the Prime Minister told us that we have a booming economy and there is really nothing to worry about as far as the future is concerned. I am extremely concerned about the future. I am worried
 

about Britain just after it has entered the Common Market, with the enormous and powerful continental competitive forces by which we are now faced. If we had entered the Common Market 10 or 15 years ago British industry would have been in a very powerful position, not in terms of modernisation and efficiency but in numerical terms; and probably we could have won markets which would have ensured that British industry would have had the capital wherewithal to have improved its base.
Clearly, however, that is not the picture now. We are faced with French industrial capacity which is highly efficient and modernised, and with a similar German machine. Italy, too, in the motor car industry, the machine tool industry and various other aspects of industry is far in advance of what we are here. It is said by some of those who look at the British economy and feel that it is not doing as well as it could, that capitalism is outmoded, that it can no longer function properly in the kind of economy we have had in this country over the past 30 years. I do not believe that that is the case at all, because, after all, capitalism is doing pretty well elsewhere.
I believe that in every area of our development where entirely new methods are required it is not a question of capitalism versus socialism but simply a matter of trying to re-gear and retool machinery some of which is over 200 years old, 100 years older than that of many of our competitors on the Continent. It is going to require quite superhuman effort on the part of of the British people, the British nation and the British economy for our industry to take its place equally alongside its continental competitors. I believe that for the Government to pretend that the economy is moving towards that position is the height of obscurantism. We arc not moving that way at all.
If I may refer back to investment, only one of our EEC partners has a lower level of investment than we have; that is Italy. The time has come, as I have said on numerous occasions in the past, for the Government to be entirely honest with themselves and with the British public outside. I believe they would be surprised at the response. What I am sure of is that we can no longer carry on deluding ourselves into believing that
 


somehow, by manipulating this or that, we can break out of the difficulties that we are in.
The difficulties we face are enormous, and before long, with this Government or the next, measures of a quite fundamental nature will have to be taken to put right the ills of the British economy. So I hope that in the course of this Finance Bill we can once again, as many of us did in the Counter-Inflation Bill, point out to the Government precisely what they have to do in order to put the British economy right; and in order to do that they have first to stop deluding themselves.

Mr. Ridley: If the hon. Member for Birmingham, Northfleld (Mr. Carter) had confined himself to the last point he made, on investment, his contribution would have been entirely relevant and of a better length. I feel this is not the time to discuss insurance premiums. I shall confine myself to the management of the economy and will touch at some length on the hon. Member's point about investment towards the end of what I have to say.
It now seems to be fashionable to talk not so much about money supply as about overheating. The two are not the same, because it is quite possible to have too great a money supply without overheating. It simply means one has jacked up one more on the ratchet to the point where there is a higher level of inflation but not the excess demand. I am afraid it is equally possible to have at the same time a high rate of money supply growth and overheating, and I fear that that may be what is happening here.
My hon. Friend the Member for Leek (Mr. Knox) almost overheated himself in denying that there were any signs of overheating. If I pour a little cold water on him I hope he will not sizzle. There are obvious signs that the economy is moving to an overheated state. We can leave out of account the overseas account. It is true that a surge of high import prices will be coming through from the food and raw material commodity increases of which we have heard. But the Chancellor was right when he said he expected exports to turn up as a result of our devaluation—and the net effect of the overseas account must be neutral so long
 

as the Government continue to let the pound float.
Here, I underline the words of the hon. Member for Cornwall, North (Mr. Pardoe). I do not believe we have realised what a transformation of the economic situation has come about since all the major currencies started to float. It means that unfair trading cannot continue. The effect to which it has smoked out the Japanese is not yet generally realised, because their game was to rely on an under-valued currency to force their exports into every country in the world. They did this by insisting, through the banking system, on channelling into the export industry funds which would not otherwise have gone there, and as a result they denuded the standard of living of their people by their failure to invest in social and domestic matters which would have increased that standard of living.
This is no longer possible, because the yen has been up-valued by 30 per cent. against the dollar and the Japanese standard of living has actually gone down as a result of this, despite the peoples' hard work of 20 years. Political pressures will only add to economic pressures to make the Japanese desist from what they were doing. I would only say in passing—it is relevant to this debate— that if we choose this moment to try to emulate the Japanese performance we are doing so at the worst possible moment and at a time when such action could not possibly succeed so long as we continue to float our currency.
I mention that only to dismiss any connection there could be between the overseas account and the domestic economy, at any rate in the long run. My right hon. Friend believes investment is going to rise. I very much hope he is right. I am not quite so optimistic, though there are signs that there is an increase coming. But this in itself will add to the pressure of demand if we are talking of overheating, and already there are very strong signs of a labour shortage, particularly in some areas, and also a shortage in some skills. In my own constituency several industrialists have told me they are short of labour. It must be said that one is hearing more and more of wage settlements which have been arrived at to secure, or to hold, labour—settlements
 


which are well above phase 2, and which, but for the fact that they might be stopped, I would be prepared to spell out by name here and now.
I am certain that in areas where it does not come into the full light of the day the norm is already being exceeded. I am fairly dubious about the norm being exceeded in some of the recent major public sector settlements. I agree with the hon. Member for Birmingham, North-field that it is extraordinarily difficult to obtain detailed knowledge of the exact terms of offered and accepted pay increases in the public sector, because Ministers seem very reluctant to give the full details. I hope we may be given them in the future. I have no doubt that demand is very strong and will become stronger, and that as the year passes the signs of overheating will become more and more apparent.

[Captain WALTER ELLIOT in the Chair.)

6.30 p.m.

I turn to the question of the borrowing requirement which was discussed by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). It is impossible to speak on this matter at this time without referring to the mortgage position which we debated yesterday. It is not so much that the extra £15 million has increased the Government's expenditure—because we are told that it is to be saved elsewhere—nor is it the amount that causes me alarm. What is rather odd is that at a time when the Government have been bidding hard to attract all available funds to meet their borrowing requirement they should have done something which will encourage extra saving in building societies and also extra demand for houses through increased demand for mortgages —which in turn will add to the overheating, if that is the right diagnosis of what is happening.

Therefore, on the two fronts of financing the Government's borrowing requirement and keeping demand in check, the Government's action seems to have had a considerable psychological impact counter to what the Government are seeking to do. I hope that this will be the last example of their going in two directions at once. Indeed, I think that we may be at the top of the cycle.

That brings me to the question of counter-cyclicality. We heard a great deal on this topic in years when the economy was slack. I wonder what my hon. Friend intends to do about counter-cyclicality in the coming months when the economy is reaching capacity. This seems to me to be an ideal time to cut Government expenditure. This is the classical moment to do so for it would remove demand from the British economy if the Government were to make fewer demands on resources.

I particularly urge my right hon. Friend the Chancellor of the Exchequer to let his eye rest on fuel prices. The hon. Member for West Lothian (Mr. Dalyell) made a fair point in suggesting that in a gathering fuel crisis we should tax fuel, but instead of taking that course we are subsidising fuel. We are paying the gas, electricity and coal industries to keep down their prices. This adds to the demand for and the consumption of fuel. It also adds to the Chancellor's financial difficulties, because he has to borrow money to pay the subsidy.

I should like my right hon. Friend to see whether he can save the major part of the £500 million which he is now spending on nationalised industry subsidies and the interest that is being forgone on capital. This course appears to be right in every sense of economic policy at this time because it would enable my right hon. Friend to save money at a time when it is classically correct to do so.

I come to investment and take up one or two points made by the hon. Member for Birmingham, Northfield. I believe that we are thinking about industrial investment in the wrong scale. We have had a deplorable performance over the decades. I do not refer to the last two years and I seek to make no party point, but am saying that we have had nothing like the level of investment that is necessary to sustain one of the foremost industrial nations.

I have just returned from a three-week visit to the United States. The most striking difference between this country and America—and it is evident in every factory that one visits, in every town, city or, indeed, in any house in which one finds oneself—is that assets are renewed perhaps two or three times more
 


quickly than they are in this country. The vast scale of investment in research and development has carried their economy through. It is difficult to understand why, in the long term, Britain has been unable to think of investment levels even half what they should be— and certainly even a quarter of the Japanese investment level—and why, also, we have been unable to identify the real factors which have prevented this happening.

The right hon. Member for Leeds, East (Mr. Healey) was right to say that this should become our major preoccupation. He was not referring to growth or to inflation, although it must be said that inflation is highly relevant to investment because if inflation is high, investment is less likely to occur. We must direct our attention to seeing why we cannot achieve this attitude of seeking to replace our assets and create more investment, since this is the policy which has made many other countries grow so fast.

Labour Members must take some share of the blame that this has not happened, because they have consistently attacked profit. They have consistently demanded that those who make successful investments and, indeed, those who make money, should be taxed very heavily. To some extent they have created a climate which discourages people from making successful investments and which has envisaged confiscation of people's money.

There is a problem in terms of labour relations and the trade unions' attitude to investment. But I believe that the achievement of a higher investment level should replace my right hon. Friend's priority of growth. Indeed, I do not know what "growth" means. Growth can mean taking up the slack of capacity, it can mean inflation, or it can mean genuine investment, leading to a higher standard of living in the future. It can mean a mixture of all three. A definition of growth is hard to give. But if my right hon. Friend would only substitute measures designed to increase investment I would go along with him wholeheartedly.

This topic is relevant to the debate that is to be held tomorrow. It is a great shame that the Opposition should wish to press an attack on tax reliefs which have gone some way to encourage invest-
 

ment. We must make sure that inflation does not get further out of hand. This is another reason why I am worried about the borrowing requirement. I believe that, in turn, it will damage our investment prospects.

Finally, we must make absolutely certain that the prices and incomes policy does not have the further effect of squeezing profit margins. I believe that earnings are rising faster than 8 per cent., but that prices will be held down by the Pay Board, because it is easier to hold down prices than wages. This is by far the greatest danger of all. It reduces the margin of profit and the money available for investment, and it also reduces an investor's confidence that this is the right place in which to invest.

My advice to the Government is to ease up on price restraint and to hold, if they must, to their policy of wage restraint, because that could be the biggest impediment to growth in the future.

Mr. Eric S. Heffer: It is always a pleasure to be called to speak after the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) in debates on the Finance Bill. I have taken part in these debates with the hon. Gentleman on a number of occasions. He always argues the classical, old-fashioned laissez-faire Tory case— and he does it admirably. He is well backed by some of his hon. Friends, who are distraught at what is happening. They now see a Conservative Government constantly intervening in economic affairs. My heart bleeds for them, because they are upset when they see Tory policies being abandoned.
I used to feel the same when I saw Labour's policies being abandoned in a Tory direction. I got very upset about that. It is interesting to try to discover what are Tory policies and what are Labour policies for prices and incomes. It could be that a prices and incomes policy is neither Labour nor Tory, but is something in the middle—something which is neither one thing nor the other. I shall not pursue that question now, because I am going slightly away from the things about which I wanted to speak. I am always fascinated by the problem facing hon. Gentlemen opposite. Should there be some control of the economy, or should there be no control whatsoever?
I now propose to say something about the question of overheating and the fact that we are apparently reaching a position in which there is a shortage of labour. This is most interesting, because the unemployment figure is now about 750,000. We must look seriously at the problem. In certain areas—for example, the South-East and the South—a shortage of labour is developing, but in other regions—for example, Scotland, the North-East, Merseyside and South Wales —there is no shortage, except perhaps in certain skilled trades.
This is not an easy problem to deal with. The need is for a much better regional policy than we now have to deal with high levels of unemployment in the regions. In many respects the Industry Act offers more carrots than did the Acts brought in by the Labour Government, but the Government must do more than they have done so far to solve the problem because that measure will not deal with it entirely.
The real requirement for regional development—and I know that I shall now lose any sympathy that I ever had from the hon. Gentlemen opposite—is greater Government intervention in order to make certain that industries are developed and directed on a publicly-owned basis. Only in that way shall we get to grips with the problem of unemployment in the regions.
Bricklayers in London are earning about £20 a day—the same is true of people in other trades—but they are not trade-union bricklayers. They are self-employed, lump-labour bricklayers. Is not that inflationary? They will not be caught by the prices and incomes policy, or the counter-inflation policy, or whatever it is called. They are outside it. What are the Government doing about that? What do the Government propose to do about other developments in self-employment which are bound to follow from their policy?
Lump labour began to increase as a result of the Labour Government's prices and incomes policy, and the practice is growing up in many industries. It is to be found in the engineering and clothing manufacturing industries, and other industries will find that self-employment is a developing practice. How do the
 

Government intend to deal with that? How does that fit into their counter-inflation policy? What ideas have they for dealing with that problem?
This is an important matter, because these self-employed people are not paying any tax or paying for their National Insurance stamps. They are not contributing one bit to the development of our society. This is free enterprise, laissez-faire capitalism in its extreme form, and I suppose hon. Gentlemen opposite welcome it, but certainly the Government do not.

Mr. Ridley: Does the hon. Gentleman think that some of the self-employed people to whom he referred also sign on as being unemployed and account for some of the 750,000 unemployed?

Mr. Heffer: I am not denying that in certain industries some people are signing on as unemployed and receiving benefits while continuing to work at lump labour jobs. There is no question about that. I am not denying that that is happening. In fact, I am saying that what the hon. Gentleman has said is true. To that extent the unemployment figure of 750,000 may be slightly inflated, but we know that some people who are unemployed are not added to the figures, so the stated figures are not accurate.
The Government ought to remember that when the Labour Government brought in their freeze there was an initial success. There always is in such circumstances. I am not surprised that the trade unions are not smashing through the barrier of the Government's policy. They did not smash through the barrier when the Labour Government brought in their policy. They grumbled at the time when Mr. Speaker was Chancellor of the Exchequer, but they did not smash the barrier.
What the Government must remember is that if wages are held down, or an attempt is made to hold them down, and at the same time prices rise, their policy will be in jeopardy. There can be no doubt that the prices of fresh food and other items are rising rapidly. Incidentally, I wonder how those who voted for our entry into the EEC feel now. I wonder how they and some of my colleagues who supported the Government feel when they realise that one of the Government's first actions, now that we
 


are in the EEC, is to try to stop further price rises under the mad CAP system. We are being asked to pay high prices for butter, while some of it is being sent to Soviet Socialist Russia at low prices. This is an amazing situation. I have never heard anything so mad in all my life. I wonder how all those who voted for our entry into the EEC feel about it now. But that is by the way, and I come back to the question of prices.
As I said earlier, prices are rising, and the question is what will happen when the cork is taken out of the bottle and we get to phase 3. The Government may be able to hold things in check for a time. Everybody is saying that Hugh Scanlon is marvellous, and that he is turning the other cheek, but I draw the attention of the House to the second part of his speech, in which he said:
Sooner perhaps than the Government expects, an explosion point will be reached if prices and other important elements of the working-class budget continue to rise, while wage restrictions continue to be imposed.
Sooner or later the cork will be taken out of the bottle and the champagne will come bubbling over. It did with the Labour Government, and it will do the same with this Government.
The Government should take note of those of us who are always being attacked in the House and the country as members of the mad Left. We warned our people what would happen. Too often they did not take notice of us. We are also warning the present Government, as some of their hon. Friends are warning them, that we are getting into a situation in which, when the cork comes out of the bottle, the inflationary process that we have known up to now will seem as nothing. It may be thought that the number of industrial disputes is high now, but if the present policy is continued it will be even higher. That is my warning to the Government.

Mr. Biffen: It is customary for this debate to range tolerably widely, and it it has lived up to that reputation today.
I was fascinated that the hon. Member for Liverpool, Walton (Mr. Heffer) should touch on the highly topical problem of the common agricultural policy and the prospect of butter sales by the Community to the Soviet Union. Our debate is graced by the presence of my hon.
 

Friend the Member for Derbyshire, West (Mr. Scott-Hopkins), who has been doing sterling work for the British housewife in the Strasbourg Assembly. But the House should know that in the pursuit of that admirable end he has been assisted by Signor Cipolla, the Italian Communist. Possibly one reason why the Labour Party is so inhibited from sending its delegates to Strasbourg is the tortured history of that party and the consequences for the signatories to the proscribed Nenni Telegram.

The Temporary Chairman(Captain Walter Elliot): Order. This is a wide-ranging debate, but I hope that the hon. Gentleman will not go too much into the subject of the Common Market.

Mr. Biffen: The Conservative parliamentary representatives at Strasbourg are happily swinging along with the Italian Communist party, or is it the other way round? Has the proselytising zeal of my hon. Friend managed to draw the Italian Communist Party in train? Either way, the matter deserves the widest possible publicity, but I agree that it probably goes rather wide of the clause.
Therefore, I return to pay my fee to the debate by talking about the terms of the clause, which concerns the regulator. In its enthusiasm for wider-ranging debate the Committee has probably been at fault in overlooking the real difference in the use of a regulator which was based upon purchase tax and the prospective use of a regulator based upon value added tax.
Like my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), I am no accolyte at the religion of fine-tuning in economics. But if Ministers are to purport to fine-tune by the use of a regulator tax of this variety there is at least a good case for saying that the old purchase tax—particularly in conjunction with the hire-purchase regulations then available to the Government, which have now happily lapsed—enabled the Government to operate directly and with much more effect on identifiable areas of the economy, particularly in respect of the motor industry and consumer durables, than will be possible for Governments in future, given the range of taxes that we now have.
I make that statement just as an observation, neither to endorse the position nor to register discontent that that
 


should be so. But it leads me to believe that we should be unwise to be too liberal in the use of the VAT regulator, in view of its tremendous ramifications upon the retail trade.
One of the things for which my hon. Friend the Financial Secretary to the Treasury can take real pride is the ease with which we have moved to a value added tax with a relative absence, notwithstanding what was said by the hon. Member for Birmingham, Northfield (Mr. Carter), of real militancy in the retail trade or among the consuming public compared with what happened in our sister States in Continental Europe.

Mr. Higgins: Mr. Higginsindicated assent.

Mr. Biffen: I am delighted that my hon. Friend agrees. My message to him is not to push his luck too far, not to have frequent changes in the rate of value added tax between one Budget and another. That would cause immense and, in my view justifiable, irritation to the retail trade, particularly under the general supervision conferred upon the inspectorate of weights and measures by the counter-inflation legislation. It will be a matter of irritation if every time there are changes in value added tax there is also to be scope for the kind of generalised complaints that I think will inevitably Mow from that.
Hon. Members have understandably used this occasion to relate their remarks rather more to the totality of taxation produced by the taxes referred to by the clause and to make one or two general economic comments. I want to take up the points made by the hon. Member for Liverpool, Walton. He and a number of others who have spoken have been concerned about the extent to which there may or may not be developing what is popularly called "overheating". What cannot be denied is that there is now developing evidence of at least a selective if not a general, shortage of labour. I am glad that the hon. Member for Liverpool, Walton agrees. I fear that for the rest of my speech he and I are likely to be in some kind of agreement. Although I have not yet received an invitation to accept honorary membership of the Tribune Group, I always travel hopefully.
Some of my hon. Friends have cast doubt on the general proposition that
 

there is an emerging and identifiable tightness in the labour market. It is always difficult to find evidence for this kind of argument, but I should like to put the views of the managing director in the United Kingdom of an organisation called Manpower—an international service organisation supplying its own employees to industry and commerce. He is a person with authority to speak on the subject. Obviously, he has a direct interest, but if I were quoting Mr. Callard on the chemical industry his views would be treated with respect, even though we should bear in mind that he is the Chairman of I.C.I. The managing director of Manpower in this country, Mr. Lance Secretan said:
Very acute shortages of skilled staff are developing through the country, and in some cases there are even signs of shortages of unskilled workers. If the ambitious plans of employers, nationally, to hire additional staff are to be achieved these shortages will be exacerbated. Severe regional imbalances between available skills and the vacancies being notified are already occurring and will get worse.
That is precisely the kind of evidence that should make us a little cautious about our policy to attain the levels of growth in the domestic product which have now become almost a ritual in Government statements on the prospects for the economy.
Other implications involve the whole of the counter-inflaltion policy, and have been referred to by the hon. Member for Liverpool, Walton. A number of my hon. Friends see the policy as one of conflict and triumph, with the disputants being the Government and trade union leaders, and more particularly national leaders of the character of Mr. Scanlon and Mr. Jones. I believe that my hon. Friends are mistaken in that analysis. I do not believe that either Mr. Jones or Mr. Scanlon is disposed to provide a confrontation, if that was ever in their minds. The test of the policy will be in the much more diffuse working of the market place.
7.0 p.m.
The hon. Member for Liverpool, Walton, speaking of money being earned by bricklayers, mentioned the figure of £20 a day being picked up by people on the lump. He is a wise man with that knowledge because, of course, he touches on precisely one of the major areas of shortage in which we are now endeavouring to see how the policy will match against


this developing market situation and, therefore, the exact area in which we would naturally ask a question of my hon. Friend the Minister of State at the Department of Employment.
This I did on Wednesday, 4th April, when I asked:
What was the estimated weekly earnings for self-employed bricklayers, plasterers and glazed tilers in the building and construction industry on 8th November, 1972, or the nearest available date; and what are the corresponding earnings on 1st April 1973 or the nearest available date? 
My hon. Friend replied:
I regret that such information is not available."—[OFFICIAL REPORT, 6th April 1973; Vol. 854, c. 167.]
Can any of my hon. Friends—and particularly my hon. Friend the Financial Secretary, as he and I will recollect days passed when we hunted joyfully as a pair on this subject of prices and incomes— put his hand on his heart and say that men on the lump in the building industry today are not earning more than they were on 8th November? No Member of the House seriously doubts that men on the lump are earning more than they were earning on 8th November, nor that in the period in prospect they will confine their marketability to £1, plus 4 per cent.
That is the emerging reality, that is the message which lies behind the comments of Mr. Lance Secretan, and that is the message I hope will be taken to heart by my hon. Friend.

Mr. Nott: In view of the debates which are to follow on Value Added Tax 1972 I believe the House would like my intervention to be fairly short. There is all the more reason for it to be short as my right hon. Friend in his opening remarks answered, and 1 believe showed to be unjustified, most of the forebodings which were disseminated by the right hon. Member for Leeds, East (Mr. Healey).

Mr. James Dempsey: Am I to understand that the intervention of the Minister indicates that we are completing the debate on this amendment, or will back benchers who have been trying to get in for some time still have an opportunity to catch the eye of the Chair after the hon. Gentleman has made his speech?

The Temporary Chairman: From the point of view of the Chair, it makes no difference whether Front Bench spokesmen have spoken or not.

Mr. Nott: The technique of the right hon. Gentleman on these regulator debates does not vary very much. He has admitted in his opening remarks that the key to investments by businessmen in this country is confidence, and this formed a large element of his speech. But he then proceeded to find every single factor he could which might undermine that confidence.
The right hon. Gentleman talked of the fear of a crashing stop, whereas I believe this fear is concentrated mainly in the pages of The Times. He emphasised the trade gap rather than, as I think would have been more helpful, the current account, which recently has been in relatively small deficit of approximately £20 million a month. He mentioned a high level of unfilled vacancies as evidence of overheating. As my right hon. Friend said, these can probably be explained by the better penetration of the Department of Employment into the labour market, and in any case unfilled vacancies are now well below their 1964 levels. Then, having said all this, he expected us to nod in sympathy when he looked at us, if I may say so, rather like a spaniel, and said that he prayed that the Chancellor's gamble would come off. I must say that we smiled a little at those remarks.
After all—I shall quote just one of his forecasts—last year he said:
… for large sections of the working class there must have been a fall—for some a very large fall—in living standards."—[OFFICIAL REPORT, 20th April 1972; Vol. 835, c. 800.]
The fact of the matter, as the right hon. Gentleman is well aware, is that the real disposable income of the British people generally during the past years has risen at a faster rate than in any year since the war.
I can best sum up my opening remarks by quoting from the speech of my hon. Friend the Chief Secretary when winding up the regulator debate last year:
Some of us had hoped that by now the right hon. Member for Leeds, East would have occupied his position long enough for us to have some idea of what the Labour Party would do were they in our stead. He would be the first to agree that there was no real


attempt at an analysis of the problems and certainly with offer of an alternative. All we had was a long diatribe of doom and disaster, some parts of which—and I am sure that this was more due to his relatively short period in office than to any malice—he will, on reflection, regret."—[OFFICIAL REPORT, Stand-Committee E, 19th June 1972 c. 1124–5.]
We all remember very well that debate upstairs in Committee, and the right hon. Gentleman will remember the incident particularly well in view of subsequent comments made by the hon. Gentleman.

Mr. Healey: They were not very helpful.

Mr. Nott: I do not believe the right hon. Gentleman would wish me to go into the remarks he made about sterling in Committee on that occasion, but we remember those remarks very well.
Public expenditure has formed a fairly large proportion of this debate, and I should therefore refer to the subject briefly. As has been repeatedly made clear in the House, the public expenditure programme of the Government shows a satisfactory trend over the medium term. I do not think anybody has disputed that fact. My right hon. Friend the Chancellor has made it clear he is always prepared to act in the short term should the interests of the proper management of the economy require it.
The Opposition should make up their minds whether or not they are in favour of cuts in public expenditure. They are very well aware that the short-term increases in the programme are attributable to social security expenditure, countercyclical expenditure and expenditure in the regions. If they wish to cut any of these, I wish they would stand up and say so.
Of policy additions for 1973–74 which total £1,098 million, £207 million related to social security. The Opposition will not wish to argue that this addition should not have been made. Of the remainder, £177 million was for countercyclical measures and no less than £475 million related to expenditure in the regions where the problem of high unemployment continues; and expenditure which brings idle resources into use costs the economy relatively little. If the right hon. Gentleman and hon. Gentlemen opposite want to cut any of these items, I wish they would stand up and say so.
To my right hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), I say that our public expenditure commitments must be looked at in the light of the substantial unemployment which existed 18 months ago. As to the future, this was set out very clearly in the Budget Statement when my right hon. Friend said that the forecast path of public expenditure on goods and services was for a relatively rapid growth up till about the middle of this year, after which there was a marked slowing down.
Table 4 on page 10 of the Financial Statement sets out clearly our reasons for expecting the rate of growth of public expenditure to slow down in the second part of this year and onwards.
Reference was made by my hon. Friend and the right hon. Member for Leeds, East and several other hon. Gentlemen, to the article in yesterday's Financial Times written by Mr. Brittan in which he commented on an Answer given to the hon. Member for Ashton-under-Lyne (Mr. Sheldon). This answer showed a low growth variant of the resources table in Cmnd. 5178 in which GDP was assumed to grow at 2·7 per cent. per annum from 1971 to 1977. There developed a short argument between the right hon. Gentleman and my hon. Friend the Member for South Angus on this point. We have never argued that the 3·5 per cent. variant shown in the public expenditure White Paper was, to use Mr. Brittan's term, a central case. Equally, we would not accept that the low variant of 2·7 per cent. should be regarded as a relevant alternative for policy purposes.
Mr. Brittan in this article, which was an important one, admits that a variant of 2·7 per cent. based on the GDP trend between 1960 and 1970 is pessimistic, because it does not allow for the large amount of spare resources which existed in the economy in the initial year of that table; namely, 1971. Even a growth rate of 2·3 per cent. to 2·6 per cent. for private consumption would be a considerable improvement on the rate achieved by the Labour Government. During their period of office private consumption grew at the abysmally low rate of 1·9 per cent. per annum. So far under this Government it has grown at an annual rate of 5·1 per cent., representing a real improvement in the standard of living of the British people.
The hon. Member for Cornwall, North (Mr. Pardoe) said—I agree with him entirely—that the crucial figure was that for productive potential. The Government have admitted—I admit again— that at present it is difficult to say what is the underlying growth of productive potential in the economy. But the National Institute and Professor Paish take a relatively optimistic view of the growth of productive potential in the economy at present, and they indicate that a considerably higher growth rate than that between 1960 and 1970 is obtainable.
My hon. Friend the Member for Leek (Mr. Knox) mentioned again the continuing surplus capacity in manufacturing industry. The latest CBI industrial trend survey showed a substantial surplus capacity, and we expect a sharp rise in industrial investment this year, thus adding substantially to capacity in the forthcoming year. The proportion of firms in the CBI survey expecting to increase capacity in plant and machinery over the next 12 months is the highest on record, and I believe that my hon. Friend was right in saying that there is still substantial slack in the economy.
Much was made by the right hon. Member for Leeds, East, the hon. Member for Cornwall, North and other hon. Members of the possible constraint of the balance of payments. We have not, however, seen the deterioration in the current account which was forecast in some quarters last year. The figures in recent months support the Chancellor's assessment in his Budget speech that much of the deficit on visible trade this year will be offset by the surplus on invisibles. With the faster growth of home supplies, the demand for imports should ease. We should congratulate ourselves on the recent performance of our exports, which have risen strikingly this year. Much of the recent rise in volume has been to the highly competitive markets of Western Europe and North America.
Although visible trade has continued in deficit—indeed, it has been in deficit for most of the last 150 years—our invisible earnings have kept down our current deficit to a modest level. We have good prospects on the current account. Our competitive position has been much
 

enhanced by the depreciation of sterling, and our exporters will be able to take full advantage of the expansion in world trade which is now well under way.
7.15 p.m.
I was challenged by the hon. Member for West Lothian (Mr. Dalyell) and others to say something about the borrowing requirement. I do not want to speak about it at length because in several debates in the last two months this topic has been fully discussed. The Government's economic policy is intended to ensure that an enhanced rate of output can be achieved in conjunction with steadier prices, and monetary policy will be consistent with these objectives. Hon. Members should not be misled—I know that my hon. Friend the Member for South Angus was not misled by this figure—by the broad definition of money supply, M3, as the recent increase has been largely attributable to structural changes and, in particular, to the large increase in certificates of deposit. The Government have now stopped the tax loophole on these CDs, and short-term interest rates have fallen in the last month or two, making it no longer profitable to borrow from the banks on the one hand and immediately to re-invest that money in CDs on the other. Certificates of deposit were yielding 12 per cent. at the beginning of March and the rate is now down to 9⅝ per cent.
I have a great deal of respect for the firm in the City mentioned by my hon. Friend, but I do not think that the amount of notes and coin in circulation is of particular significance. Amounts vary to meet the public's convenience, but no relevant conclusion about money supply can be drawn from the figure of notes and coin in circulation.
I accept that the borrowing requirement is high, but it is inflationary only so long as it is financed in the banking sector. The Government's firm intention, as shown by the new securities announced in the Budget, is to finance the borrowing requirement in a non-inflationary way. The reverse yield gap is extremely wide, and if inflationary expectations continue to diminish I am confident that the Government will continue to be successful in selling their securities to the non-bank public. We are reasonably confident in that regard.

Mr. Healey: Do the Government plan to continue to subsidise their competitors in this market as they have subsidised the building societies?

Mr. Nott: The right hon. Gentleman must appreciate the facts. I have already pointed out to my hon. Friend the Member for South Angus that during the past two or three months exceptional circumstances prevailed in the money market. The tax-gathering season was forcing up short-term interest rates to unusually high levels, and consumer spending was running at an unusually high level in that period. Over the period from the beginning of March to the present there have been unusual circumstances in that short-term market. It might be appropriate, although I have not spoken for long—

Mr. Bruce-Gardyne: Will my hon. Friend make clear for the benefit of the House whether it remains the Government's belief that high interest rates will be required in the months ahead to finance the Government's borrowing requirement in a non-inflationary manner?

Mr. Nott: My hon. Friend knows that no Treasury Minister has ever given a forecast of interest rates. [Interruption.] That was not a forecast, that was comment on what had happened in the immediate past! What will bring down long-term interest rates in the future is success in our fight against inflation. I hope very much that hon. Members opposite will co-operate with us in this most important fight.
I think I should conclude my remarks because there are several other debates still to take place. In doing so I refer to the official Opposition amendment, which already has raised a certain amount of derision. I realise that it was tabled to provide for a short debate on economic policy, but it is nevertheless strange that if it were carried it would significantly reduce the Chancellor's freedom of economic management in the first eight months of 1974. I could not quite grasp the comments of my hon. Friend the Member for Oswestry (Mr. Biffen), because at one stage he was kind enongh to say that in our careers at one time we hunted as a pair.

Mr. Biffen: I was referring to my hon. Friend the Member for Worthing (Mr. Higgins).

Mr. Nott: 1 am sorry. I do not think my hon. Friend the Member for Oswestry and my hon. Friend the Member for Worthing (Mr. Higgins) did hunt as a pair when it was a question of wishing to work into the regulator a discrimination which, fortunately with the regulator on VAT, we have to a large extent eliminated. So far as I could understand the remarks of my hon. Friend the Member for Oswestry, he was sorry that we could not make a distinction between consumer goods and other items. I took him to mean that he would prefer—because this is the only way I could see the problem sorted out-different rates of VAT rather than a single unified rate. Although he was concerned about the effect in certain circumstar.ces of VAT on retailers, the great thing about a VAT regulator is that if it were changed—and, of course, under a Labour Government it would certainly be a change upward—it would not change retailers' stocks. The old regulator had a very adverse effect on retailers' stocks.
Referring to the amendment, I can understand that the Opposition dislike all order-making powers to raise revenue duties or indirect taxation. By putting shackles on some future mythical Labour administration, they seek to prevent their own right hon. Friends from ever damaging the poorer sections of the community, as happened when the regulator was activated upwards by the Labour Government in 1966 and 1968. It is interesting that the Opposition spend so much time talking against the regressive nature of indirect taxation, because when they left office in 1970 taxes on expenditure represented 19·4 per cent. of the gross national product and by 1972 taxes on expenditure had been reduced during our period of office to 17·3 per cent. and this year the figure will be even lower. So let us hear rather less from hon. Members opposite about the regressive nature of indirect taxation because their record does not allow them to make these remarks. As the Chancellor said, had VAT been introduced to raise the same amount of revenue as when they were in office the rate would be not 10 per cent. but 15 per cent.
Our policies are designed to raise the real living standards of the British people, and in that main objective we have been dramatically successful. The right hon.
 


Member for Leeds, East, whose Government had one of the worst economic records in British history, has been reduced to carping about our achievements and to woeful prophecies which will prove as inaccurate this year as they did last.

Mr. Robert Sheldon: Each time we have this regulator debate we start by talking about the tradition of the debate, a tradition which extends no longer back than 1968. We are finding a newer tradition in that on each occasion I remind the Committee how recently this tradition was established. I was one of the very few people who used to speak on the actual use of the regulator, so my qualifications in this debate are impeccable.
Nevertheless, this became a very useful vehicle for an economic debate. Starting in 1968 when Iain Maclecd prevailed on the Chairman in Standing Committee that this was a long-standing tradition— having invented it only a few minutes before—we have been accustomed to finding that this fits in very usefully as a way of explaining, discussing and debating the changes which have taken place in the economy over the period between the introduction of the Budget and discussion of the Finance Bill in Committee.
When we look at these changes we see that there is one thing which appears very clear. That is that the Government are pinning their hopes more and more on the hopes of growth in the remaining part of this year and the early part of next year. It is becoming rather more akin to the kind of dash for growth that we witnessed in the summer months of 1964. I am one who believed fervently in the great hopes for growth which seemed possible in 1970 when Iain Macleod asked for a few months to examine the situation. I stated in debate that I was prepared to give him that time because it was important to get this matter right.
There was uniquely at that time an opportunity to get this country on this long-term path for growth with the very high balance of payments situation, with the confidence that could be engendered in industry as a whole and by means of
 

harmonious relations between both sides of industry and diminution of the gap between rich and poor. The basis for such an achievement was clearly within our grasp. The situation, of course, since then has deteriorated rapidly.
The first cause I see for that deterioration has been the decline in confidence of British industry directly attributable to the actions of the Government, the way they related the tough, abrasive measures to the investment plans of industry, their talk about "lame ducks", the tough policy that industries which could not succeed would have to go to the wall. This was hardly the kind of talk calculated to engender in industry the expansion, the optimism and, indeed, the confidence about which Conservative Governments in the past have always made a great deal of play.
Conservative Governments always talk about the confidence of industry and the need to maintain that confidence. The worst attack on that confidence came from the Government themselves. So we saw that, instead of those harmonious relations between Governments and both sides of industry, we had this division, the division between rich and poor, about which we have heard so much. So we started the main interest in the running of the economy by the present Chancellor in the details of tax reform which we have come to accept as a mark of his Chancellorship.
As we start the examination of the details of tax on this first day in Committee on the Finance Bill, I should point out that the Chancellor and I at least share one common interest in our addiction to taxation matters, and I am sure that from either side of the Committee we could spend many hours together talking of the relative merits of different kinds of tax curbs and advantages that accrue.
But there is an important distinction between the Chancellor of the Exchequer and myself. It is that I regard this as an interest, a hobby, something which I think would be a useful reform, but from which I never expect too much, but the Chancellor seems to have set this interest at the cornerstone of his economic achievements. He has tended to be blinded by his own enthusiasm for tax reform as an end not only in itself, but because he attributed rather too great a result to what might
 


be available from it. The dash, drive and thrust that he expected would arise as a result of the tax reforms did not come to pass. Meanwhile, the economy has gone into a steady decline.
[Sir ROBERT GRANT-FERRIS in the Chair]
7.30 p.m.
So we found ourselves at the beginning of last year—I think that most people would set that as the critical time—with unemployment rising to over 1 million, with the Industrial Relations Act causing the industrial troubles, and with the panic at that time that led to the rapid expansion in public expenditure and the ruination of a policy of considered and feasible increases in public expenditure in the light of that which was available for the proper projection of such expenditure.
On 12th March the Chief Secretary to the Treasury, referring to the General Sub-Committee of the Select Committee on Public Expenditure, said:
We therefore reject the committee's conclusion that our public spending over the next 12 to 18 months will constrain personal consumption to a rate significantly below that of total output. It just is not true."—[OFFICIAL REPORT, 12th March 1973; Vol. 852, c. 912.]
We cannot help but compare that forthright statement with the statement that we heard today from the Chancellor of the Exchequer and the echo in the speech by the Minister of State. This conclusion by the General Sub-Committee of the Expenditure Committee of this House was denied in the strongest possible terms by the Chief Secretary, and the Chancellor today said that the rate of growth of consumer expenditure is going to moderate. That is how I put down his words. I think they are a fair transcription of what he said. The Minister of State added his echo. No one, least of all my hon. Friends the Members for Liverpool, Walton (Mr. Heffer) and Sheffield, Attercliffe (Mr. Duffy), can doubt the consequences that can arise from this rather less buoyant state of affairs when consumer expenditure and earnings fail to increase in the manner predicted by the Government.
It is clear that the way in which public expenditure got out of control found another echo in the speech by the Chancellor of the Exchequer on 6th March when he said:
 

there will be the strictest control of expenditure, both on existing policies and for any new proposals."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 250.]
One could not help but compare that strong forthright statement with the statement that we had only last week about the £15 million to help those with mortgages. Where that £15 million will appear in any future expenditure White Paper I do not know. Many of us doubt that we shall ever be able to trace it or find where it has gone.
The Minister of State amended the figures for the counter-cyclical expenditure to those that were given in the Report of the General Sub-Committee. This is an unsatisfactory way of conducting our debates on this matter. The Sub-Committee produced a report, and, instead of commenting on it properly, the Chief Secretary made one comment which was manifestly wrong. There was disagreement, and the Minister of State, in an aside, tried to correct it this evening.
At the end of the day we must consider that the Government have four main variables which they are able to control: how much they raise in public expenditure, how much they tax, the amounts that are left for personal consumption, and what is left for investment. If they increase one they must make corresponding changes in the others. When they find that the additions that they make relating to the disposition of all these variables do not add up, they are bound to be on a course that cannot be sustained. It is more than likely that the Government are on such a course. If they realise this, then, rather than spending their main periods of examination on taxation, they might be better placed to move towards a better understanding of how we should be progressing to obtain the growth that we so urgently need.
The Chancellor of the Exchequer, as recently as the Budget Statement on 6th March, said:
Since we came to office, we have reduced taxation on a scale unprecedented in our history. Taxation as a proportion of gross domestic product has been cut from 35 per cent. to 30 per cent."—[OFFICIAL REPORT, 6th March 1973: Vol. 852, c. 240.]
It is still a matter of great pride, even at a time like this, that the right hon. Gentleman cuts taxation from 35 per cent. to 30 per cent.

Mr. Nott: What is the hon. Gentleman recommending? Is he recommending that we return to the low growth of output and private consumption and the greatly increased tax rates of the Labour administration?

Mr. Sheldon: I am recommending that we do not borrow £4,400 million in an attempt to avoid taxing properly the results of the expenditure that the Government have undertaken. Although they have reduced taxation from 35 per cent. to 30 per cent., they have increased the borrowing requirement from almost nothing to about 8 per cent. of our gross national product. This financial arrangement is causing so much of our present inflation.
In his Budget Statement on 30th March 1971 the Chancellor of the Exchequer said:
For 1971–72, the Central Government's borrowing requirement is now forecast to be a little over £600 million ".
Later he said:
The monetary policy which 1 have announced reflects my determination not to allow an undue expansion of the money supply."—[OFFICIAL REPORT, 30th March 1971; Vol. 814, c. 1396.]
This was some determination. Rather than tax properly, as he should have done, he allowed the borrowing requirement to get out of control because public expenditure is also out of control.

Mr. Barber: Does the hon. Gentleman, who always speaks fairly about these matters, agree that he is advocating either increased taxation or reduced public expenditure, or both? If he agrees with that, which must be the only logical conclusion from what he is saying, may I ask what he has in mind?

Mr. Sheldon: I should think that the Chancellor of the Exchequer would be the last person to take pride in a borrowing requirement that has reached unprecedented levels. The whole Committee knows that that borrowing requirement will have to be paid for by one Government some day, and that that Government will have to raise it by taxation. The Chancellor should not boast that he has made tax cuts, on the one hand, and, on the other hand, has left others to pay for that massive borrowing requirement which has caused the greatest inflation in our history. This inability to tax
 

has led to an excessive dependence on the increase in the borrowing requirement. The Government have pumped all this money on to the market, and the inflation is largely due to what the Government have done. They are the prime culprits.

Mr. Bruce-Gardyne: Since the hon. Gentleman seems to be coming to his peroration, and as the Opposition apparently intend to divide the Committee on this amendment, may I ask him to explain what the amendment means and what the consequences of its being carried would be?

Mr. Sheldon: Ever since Iain Macleod put down the first amendment to extend the time it has been a symbolic debate. It is a Division on the Government's economic policy. This is how it has been treated each year. We have reached levels of absurdity in the money supply which have rarely been reached before due to the borrowing requirement. The Government are busy trying to sell securities to the non-banking domestic public. They are competing with building societies, and, as my right hon. Friend the Member for Leeds, East (Mr. Healey) said, they are subsidising their own competition. Only the writers of fantasy could have devised the situation that the Chancellor has brought about.
The Chancellor sets up high interest rates and then subsidises the results of his own actions.

Mr. Barber: I can understand that the hon. Gentleman and other hon. Members take a particular view about the borrowing requirement. However, there is a great difference in that my hon. Friends have said frankly what they would do to reduce the borrowing requirement. I ask again what would the Opposition do? It is no good saying that the borrowing requirement is too high. At least one of my hon. Friends has said publicly that he advocates increasing taxation. Is that the view of the Opposition? If the Opposition would cut public expenditure, which part of public expenditure would they cut?

Mr. Sheldon: The right hon. Gentleman should not pride himself on reaching the highest level of borrowing requirement that has ever been reached. That


is not a matter for congratulation. [HON. MEMBERS: "Answer."] The Chancellor has brought about inflation. If he genuinely considers that the borrowing requirement is a better alternative than taxation or a massive rate of inflation, let him say so. Let him come to the Dispatch Box and say that he accepts that the borrowing requirement, with its attendant inflation, is something that he is prepared to accept rather than increased taxation. When he says that honestly and openly we will know that he is the man to blame for the level of inflation over which he now presumes to preside. He gives subsidies, as his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) says, to anything that comes along so as to preserve the policy on which he has embarked.
The highest level of absurdity was reached when the Government considered mortgages. Money was given to those who have the perfect inflation hedge, the people who have cheap rates of interest after tax relief and the ability to escape capital gains tax. They enjoy estate duty provisions and improvement grants. The people who benefit from such fiscal advantages are those to whom the money is being given. No one can say that that is other than grossly unfair and a

policy that has no basis in equity or in common sense.

In 1970 the Government could have gone for growth. They had an excellent opportunity and they could have succeeded. But even now the Chancellor, with a base which is nothing like as good as it was then, puts forward a policy of growth and the policy of hope which he has come to espouse. The Chancellor, as my right hon. Friend the Member for Leeds, East said, is taking a gamble. He knows full well that the advice that he is getting, some of which comes from within the Treasury, points to the fact that there is trouble ahead due to the high levels of public expenditure. The Chancellor apparently does not believe these forecasts, although we note the change in the way that he denies some of our suggestions. He hopes for something to turn up.

The Government's policy is one of hope. It is hope that his growth gamble will come right in the end. The Chancellor has not convinced the House. We hope that he is right, but the lack of conviction which he has expressed this afternoon deserves to be condemned.

Question put, That the amendment be made:—

The Committee divided: Ayes 163, Noes 191.

Division No. 101.]
AYES
[7.44 p.m.


Allaun, Frank (Salford, E.)
Dormand, J. D.
Jenkins, Rt. Hn. Roy (Stechford)


Armstrong, Ernest
Douglas, Dick (Stirlingshire, E.)
John, Brynmor


Ashton Joe
Duffy, A. E. P.
Johnson, James (K'ston-on-Hull, W.)


Barnett, Joel (Heywood and Royton)
Dunnett, Jack
Jones, Dan (Burnley)


Bennett, James (Glasgow, Bridgeton)
Eadie, Alex
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)


Bishop, E. S.
Edwards, William (Merioneth)
Jones, T. Alec (Rhondda, W.)


Blenkinsop, Arthur
English, Michael
Judd, Frank


Boardman, H. (Leigh)
Ewing, Harry
Kaufman, Gerald


Booth, Albert
Faulds, Andrew
Kelley, Richard


Broughton, Sir Alfred
Fitch, Alan (Wigan)
Kerr, Ruasell


Brown, Hugh D. (G'gow, Provan)
Fletcher, Ted (Darlington)
Kinnock, Neil


Buchan, Norman
Foot, Michael
Lamble, David


Buchanan, Richard (G'gow, Sp'burn)
Forrester, John
Lamond, James


Butler, Mrs. Joyce (Wood Green)
Freeson, Reginald
Lawson, George


Campbell, I. (Dunbartonshire, W.)
Galpern, Sir Myer
Leadbitter, Ted


Carmichael, Neil
Gilbert, Dr. John
Lee, Rt. Hn. Frederick


Carter, Ray (Birmingham, Northfield)
Ginsburg, David (Dewsbury)
Leonard, Dick


Castle, Rt. Hn. Barbara
Golding, John
Lomas, Kenneth


Clark, David (Colne Valley)
Gourlay, Harry
Loughlin, Charles


Cocks, Michael (Bristol, S.)
Grant, John D. (Islington, E.)
Lyon, Alexander W. (York)


Cohen, Stanley
Griffiths, Eddie (Brightside)
Lyons, Edward (Bradford, E.)



Hamilton, James (Bothwell)



Concannon, J. D.
Hamilton, William (Fife, W.)
Mabon, Dr. J. Dickson


Conlan, Bernard
Hannan, William (G'gow, Maryhill)
McBride, Neil


Crawshaw, Richard
Harper, Joseph
McCartney, Hugh


Cunningham, G. (Islington, S.W.)
Harrison, Walter (Wakefield)
McElhone, Frank


Dalyell, Tam
Healey, Rt. Hn. Denis
McGuire, Michael


Davidson, Arthur
Heifer, Eric S.
Machin, George


Davies, Denzil (Llanelly)
Horam, John
Mackenzie, Gregor


Davies, G. Elfed (Rhondda, E.)
Hughes, Mark (Durham)
Mackle, John


Davis, Terry (Bromsgrove)
Hughes, Roy (Newport)
Mackintosh, John P.


de Freitas, Rt. Hn. Sir Geoffrey
Hunter, Adam
Maclennan, Robert


Dempsey, James
Irvine, Rt. Hn. Sir Arthur (Edge Hill)
McMillan, Tom (Glasgow, C.)


Doig, Peter
Jenkins, Hugh (Putney)
McNamara, J. Kevin




Mahon, Simon (Bootle)
Pavitt, Laura
Strang, Gavin


Marquand, David
Peart, Rt. Hn. Fred
Thomas,Rt.Hn.George (Cardiff,W.)


Marshall, Dr. Edmund
Perry, Ernest G.
Urwin, T. W.


Mason, Rt. Hn. Roy
Prescott, John
Wainwright, Edwin


Mayhew, Christopher
Price, William (Rugby)
Walden, Brian (B'm'ham, All Saints)


Meacher, Michael
Rees, Merlyn (Leeds, S.)
Walker, Harold (Doncaster)


Mellish, Rt. Hn. Robert
Rhodes, Geoffrey
WatKins, David


Mendelson, John
Roberts, Albert (Normanton)
Weitzman, David


Millan, Bruce
Roberts,Rt.Hn.Goronwy(Caernarvon)
Wellbeloved, James


Miller, Dr. M. S.
Roderick, Caerwyn E.(Brc n&amp;R'dnor)
White, James (Glasgow Pollok)


Milne, Edward
Rodgers, William (Stockton-on-Tees)
Whitehead, Phillip


Molloy, William
Rowlands, Ted
Whitlock, William


Morris, Alfred (Wythenshawe)
Sandelson, Neville
Williams Alan (Swansea W.)


Morris, Charles R. (Openshaw)
Sheldon, Robert (Ashton-under-Lyne)
Williams, w T (Warrington)


Morris, Rt. Hn John (Aberavon)
Short,Rt.Hn.Edward (N'c'tle-u-Tyne)
Wilson, Rt. Hn. Herold (Huyton)


Mulley, Rt. Hn. Frederick
Sillars, James
Wilson, William (Coventry, S.)


Murray, Ronald King
Silverman, Julius
Woof, Robert


Oakes, Gordon
Skinner, Dennis



Ogden, Eric
Spearing, Nigel



Orbach, Maurice
Spriggs, Leslie
TELLERS FOR THE AYES:


Oswald, Thomas
Stallard, A. W.
Mr. Donald Coreman and


Owen, Dr. David (Plymouth, Sutton)
Stoddart, David (Swindon)
Mr. James [...]


Parker, John (Dagenham)
Stonehouse, Rt. Hn. John





NOES


Adley, Robart
Hall, Miss Joan (Keighley)
Monks, Mrs. Connie


Allason, James (Hemel Hempstead)
Hall, John (Wycombe)
Monro, Hector


Archer, Jeffrey (Louth)
Hall-Davis, A. G. F.
Montgomery, Fergus


Astor, John
Hamilton, Michael (Salisbury)
More, Jasper


Atkins, Humphrey
Hannam, John (Exeter)
Morgan, Geraint (Denbigh)


Baker, Kenneth (St. Marylebone)
Harrison, Brian (Maldon)
Morgan-Giles, Rear-Adm.


Baker, W. H. K. (Banff)
Haselhurst, Alan
Murton, Oscar


Balniel, Rt. Hn. Lord
Hastings, Stephen
Nabarro, Sir Gerald


Batsford, Brian
Hawkins, Paul
Neave, Airey


Bell, Ronald
Hayhoe, Barney
Nicholls, Sir Harmar


Benn Rt. Hn. Anthony Wedgwood
Hicks, Robert
Noble, Rt. Hn. Michael


Biffen, John
Higgins, Terence L.
Normanton, Tom


Body, Richard
Hltey, Joseph
Nott, John


Bowden, Andrew
Hill, John E. B. (Norfolk, S.)
Oppenheim, Mrs. Sally


Bruce-Gardyne, J.
Holland, Philip
Page, Rt. Hn. Graham (Crosby)


Bryan, Sir Paul
Holt, Miss Mary
Pardoe, John



Hooson, Emlyn



Buchanan-Smith, Alick (Angus,N&amp;M)
Hornby, Richard
Parkinson, Cecil


Buck, Antony
Hornsby-Smith, Rt.Hn.Dame Patricia
Percival, Ian


Burden, F. A.
Howe, Rt. Hn. Sir Geoffrey
Powell, Rt. Hn. J. Enoch


Butler, Adam (Bosworth)
Howell Ralph (Norfolk N)
Price, David(Eastleigh)


Carr, Rt. Hn. Robert
Hunt, John
Prior, Rt. Hn. J. M L.


Chichester-Clark, R.
Hutchison, Michael Clark
Proudfoot, Wilfred


Churchill. W. S.
Iremonger, T. L.
Pym, Rt. Hn. Francis


Clark, William (Surrey, E.)
Irvine, Bryant Godman (Rye)
Ramsden, Rt. Hn. James


Clegg, Walter
James, David
Rawlinson, Rt. Hn. Sir Peter


Cockeram, Eric
Jessel, Toby
Redmond, Robert


Cooke, Robert
Jones, Arthur (Northants, S.)
Reed, Laurance (Bolton, E.)


Coombs, Derek
Jopling, Michael
Rees, Peter (Dover)


Cooper, A. E.
Kaberry, Sir Donald
Rhys Williams, Sir Brandon


Corfield, Rt. Hn. Sir Frederick
Kellett-Bowman, Mrs. Elaine
Ridley, Hn. Nicholas


Cormack, Patrick
Kimball, Marcus
Rippon, Rt. Hn. Geoffrey


Costain, A. P.
King, Evelyn (Dorset, S.)
Roberts, Wyn (Conway)


Crowder, F. P.
King, Tom (Bridgwater)
Rost, Peter


d' Avigdor-Goldsmid, Maj.-Gen.Jack
Kinsey, J. R.
Russell, Sir Ronald


Dean, Paul
Kitson, Timothy
St. John-Stevas, Norman


Deedes, Rt Hn W. F.
Knox, David
Scott-Hopkins, James


Digby, Simon Wingfield
Lambton, Lord
Shaw, Michael (Sc'b'gh amp; Whitby)


Dykes, Hugh
Lament, Norman
Sinclair, Sir George


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Lane, David
Skeet, T. H. H.


Eyre, Reginald
Langford-Holt, Sir John
Smith, Cyril (Rochdale)


Fenner, Mrs. Peggy
Le Marchant, Spencer
Smith, Dudley (W'wick &amp; L'mington)


Fidler, Michael
Longden, Sir Gilbert
Soref, Harold


Fisher, Nigel (Surbiton)
Luce, R.N.
Speed, Keith


Fookes, Miss Janet
McLaren, Martin
Stanbrook, Ivor


Fortescue, Tim
Maclean, Sir Fitzroy
steel, David


Fowler Norman
McMaster, Stanley
Stewart-Smith, Geoffrey (Belper)


Fox Marcus
McNair-Wilson, Michael
Stodart, Anthony (Edinburgh, W.)


Fry, peter
McNair-Wilson Patrick (New Forest)
Stoddart-Scott, Col. Sir M.


Gardner, Edward
Madel, David
Stokes, John


Gibson-Watt, David
Mather, Carol
Stuttaford, Dr. Tom


Gilmour Sir John (Fife, E.)
Maxwell-Hyslop, R. J.
Taylor, Edward M.(G'gow.Cathcart)


Goodhart, Philip
Mills, Peter (Torrington)
Taylor, Frank (Moss Side)


Gorst, John
Mills, Stratton (Belfast, N.)
Tebbit, Norman


Gray, Hamish
Miscampbell, Norman
Thomas, John Stradling (Monmouth)


Green, Alan
Mitchell,Lt.-Col. C.(Aberdeenshire,W)
Thompson, Sir Richard (Croydon, S.)


Griffiths, Eldon (Bury St. Edmunds)
Mitchell, David (Basingstoke)
Tilney, John


Grylls, Michael
Moate, Roger
Trafford, Dr. Anthony


Gummer, J. Selwyn
Money, Ernie
Trew, Peter







Tugendhat, Christopher
Wells, John (Maldstone) 
Worsley, Marcus

Turton, Rt. Hn. Sir Robin
White, Roger (Gravesend) 
Younger, Hn. George


Waddington, David
Wiggin, Jerry



Walder, David (Clitheroe) 
Wilkinson, John
TELLERS FOR THE NOES: 


Walker-Smith, Rt. Hn. Sir Derek
Wolrige-Gordon, Patrick
Mr. Kenneth Clarke and


Ward, Dame Irene
Wood, Rt. Hn. Richard
Mr. Victor Goodhew. 


Weatherill, Bernard
Woodnutt, Mark

Question accordingly negatived.

The CHAIRMAN, being of the opinion that the principle of the Clause and any matters arising thereon had been adequately discussed in the course of debate on the Amendment proposed thereto, forthwith put the Question, pursuant to Standing Order No. 48 (Debate on clause or schedule standing part), That the Clause stand part of the Bill: —

Question agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4

RELIEF FOR TAX- OR DUTY-PAID STOCK HELD AT COMMENCEMENT OF VAT

Mr. Joel Barnett: I beg to move Amendment No. 2, in page 4, line 38, leave out ' taxable '.

The Chairman: With this amendment the Committee is to take Amendment No. 3, in line 40, leave out 'April ' and insert 'October'.
Amendment No. 4, in line 40, leave out April' and insert 'June'.
This selection is contrary to the selection published at the Door.

Mr. Barnett: One cannot help feeling that if there were a trade union of Members of Parliament there would be some ground for complaint about the speech of the Chief Secretary to the Treasury the other week on the subject of value added tax. That speech is to be condemned for the way in which it adds to the general disillusionment with politicians. The Chief Secretary very foolishly exaggerated the terms of this tax. He did so in a way that one might not expect even the Financial Secretary, who loves this tax so much, to speak about his beloved VAT. As has been stated in the Press, the Chief Secretary greatly exaggerated the attractions of the tax.
In respect of this tax and of anything else, what the country wants to hear is the truth. That is especially so with VAT,
 

when they can seen for themselves what a nonsense it is. All the tax does is to add to the disbelief that exists concerning the utterances of the present Government and, probably, of Members of Parliament generally.
I do not dispute that there are some advantages in VAT. However, the main advantage of having a broadly-based tax has been very much removed by all the zero ratings which have been forced upon the Government. Furthermore, if one wanted a broadly-based indirect tax one could have done a great deal with the use of the existing purchase tax by making it much more broadly based. I do not dispute that we have to learn to live with VAT, but I still argue that for as long as it is on the Statute Book it will remain an administrative monstrosity of a tax. All those who have to deal with it will find it enormously complicated.
It would, therefore, have been very much better if the Chief Secretary had told the country the truth about the tax. For example, he could have said that prices overall should not rise because no more tax is collected through this system than was collected through the two taxes which it replaces. But the present Government are quite incapable of controlling prices. Indeed, it was absolutely lunatic to introduce this tax at present. I find it difficult to imagine that even Treasury Ministers would argue that since VAT was introduced there have not been price increases. If anyone disputes the fact that prices are still rising, let me quote one or two references made in the Press. I refer first to an article in the Sunday Times of last Sunday, by Mr. William Ellsworth Jones. He said:
The pattern of complaints is the same across the country: launderettes putting 5p on a 15p wash "—

Mr. Healey: And no season tickets.

Mr. Barnett: No season tickets. I see that the Minister of State has not persuaded launderettes to issue season tickets. Mr. Jones continued:
car park charges, which have shot up, the rounding off of halfpennies. Many complaints
 


are concerned with food, and cafes which charge VAT on take-away meals and restaurants whose bills have soared. Inspectors have found that most restaurants have simply put the full 10 per cent. VAT on their prices, ignoring savings made by the abolition of SET.
As we know, this was what the Chancellor was expecting all shopkeepers, cafes and restaurants not to ignore.

Mr. Higgins: The hon. Gentleman will recall that the clause and the amendments with which I understood him to be dealing are concerned with the rebate of purchase tax. I have a slight problem in relating what he has been saying to that matter.

Mr. Barnett: I am sure that the Financial Secretary would not like to hear about these things. I am surprised that he did not hear that the Chair has kindly allowed the debate to go a little wider and to cover the whole of the tax. In fairness—the Minister should not look too surprised—the first amendment would delete the word "taxable". In other words, we are discussing whether there should be a "taxable person" who would get his rebate for tax, or whether it should be a person who has not even registered for tax.
In those circumstances I am not surprised that the Chair was kind enough to agree that we should broaden the debate so as to discuss a few other matters. I am sorry, but the Financial Secretary will just have to sit and listen to some of the complaints of ordinary people.

8.0 p.m.

The Chairman: 1 am sorry to interrupt the hon. Gentleman again, but what has happened in the past does not concern the amendments that we are discussing. I am sure he will realise that I have made certain concessions from the Chair to allow these amendments to be taken together. I would not, therefore, expect a broad debate, going beyond these amendments.

Mr. Barnett: I am keeping it very narrow, Sir Robert—

Mr. Charles Loughlin: On a point of order, Sir Robert. Will you define for us the scope within which we can debate these three amendments?

The Chairman: No, the Chair is never so rash as to do something like that. What I will do is pay particular attention to the speeches of hon. Members and leave it to their judgment to remain in order without correction.

Mr. Barnett: I appreciate your kindness, Sir Robert. I am sure that you will interpret the debate in the right way and look at this subject in the way in which the people of this country are looking at it. I am sorry that the Financial Secretary does not like to hear this, but the people of this country do not consider that VAT is working in exactly the way in which the Chief Secretary and the Chancellor wanted.
Before I was interrupted, I was quoting from an article in the Sunday Times. It goes on:
Inspectors have found that most restaurants have simply put the full 10 per cent. on their prices, ignoring the saving made by the abolition of SET.
That is not surprising. Only Treasury Ministers could have imagined that traders would not simply pocket SET. Could they really have believed that this benefit would be passed on? It is remarkable that such an outcome could have been thought possible. The article goes on to quote Mr. Leslie Griffiths, a London chief inspector, as saying:
It always seems to be very difficult to take a tax off.
So it is hardly—[Interruption.] The hon. Member should not boast too much about the taxes that his Government have taken off. As my hon. Friend has said, the only way that he has managed to take them off is by borrowing the whole amount. But I am being tempted to go too wide.
Not only that Sunday Times report makes clear the extent to which prices are rising because of this tax. There was an interesting piece by Mary Brogan in another Sunday paper this week, in which she said that the Chief Secretary and other Treasury Ministers had been saying:
 Do not be diddled by VAT, shop around, compare prices and save money.
She goes on:
I never cease to be filled with admiration for women who can look at 4 fluid ounces of a commodity in one shop at Xp, then go off to visit another shop and spot 250 centilitres of the same substance at Yp …. The only
 


trouble about this is that it requires a dedication to the art of shopping which I … do not possess and am never likely to.
One might add that most housewives and old-age pensioners do not have that art either.
Mary Brogan goes on:
It is this last point"—
referring to this method of trying to get the best possible price—
which makes me particularly irritated when politicians (male) take a high moral tone in exhorting housewives not just to go to the nearest shop, but to survey the field. It is just possible that these noble fellows carry the weekend shopping home, but, if they do, they are members of an extremely small minority.
This applies, of course, to the small minority at the Treasury who, in a high moral tone, are telling all the housewives and old-age pensioners—as the Chief Secretary told us the other day—to say to the shopkeeper, "You have got it wrong. You really should not do that. You should reduce the price because of the abolition of SET." This is remarkable.

Mr. Higgins: The hon. Member knows that I have many times been happy to discuss all aspects of value added tax. If the hon. Gentleman is talking about SET he cannot relate it to an amendment specifically concerned with purchase tax rebate.

Mr. Harriett: The Minister should not get so bad-tempered. He must sit and take it. He has handed out to 55 million people the burden of having to deal with this damned tax and he must now sit and listen to some of the complaints that are being levied throughout the country.
If the Minister were to be truthful and honest he would not exaggerate the wonders and beauties of this lovely tax of his; he would concede the anomalies. He would not talk about a broadly-based tax, free from anomalies, and comprehensive. He should recognise that it may be that what he wanted—I have a feeling that it is precisely what he wanted—was a really comprehensive, broadly-based tax. He is still talking about that; the only trouble is that the Chancellor has changed it while he was not looking. I deduced from the look on the Minister's face that this was the case when the Chancellor was announcing yet further anomalies.
I want to refer to a few important examples. Questions are being asked in all sorts of quarters, perhaps by those who have not registered. It may be for these very reasons that they have not registered.
One relates to the clothing worn by young children—"genuine" young children, in the terms of Notice No. 714. There was a letter in The Times the other day about this, and I have had letters from people who manufacture children's clothes complaining about the way in which this will work. They do not know how it will work. They are in a terrible state of wonderment about what will happen.
The letter to which I referred, from a Mr. Tarlo, appeared in the Business News on 9th April. It related precisely to Notice, No. 714; and said:
The notice asserts that children's clothing correctly zero-rated by manufacturer and wholesaler will become chargeable with VAT when sold by a retailer whose shop or counter fails to comply with requirements laid down in the notice, or if the clothing is either labelled or not labelled, as the case may be, as required by the notice.
I should be interested to know—as, I imagine, would most children's clothing manufacturers and retailers—whether that is the case.
Mr. Tarlo went on:
What is more important to the consumer is that if VAT-man intends to enforce his interpretation of the law as set out in the notice, then the widely publicised announcement that children's clothing will not go up in price because of VAT is false.
We need to know the answer to that question.
I am sorry to burden the Financial Secretary with the responsibility of answering these questions, but they are important questions, which are being asked by many traders and manufacturers who cannot get the answers from local Customs and Excise officers. I am not blaming them; they are madly overworked and just do not have the answers. The least we can expect is that the Minister should answer them now.
What about sweets, lollipops and ice creams? What is the position of these items when sold in a cinema or at a swimming bath? As I understand it, the ludicrous situation is that if one buys a lollipop when going into the cinema it is subject to VAT, whereas if


one buys it when leaving the cinema it is not. If that is not so, perhaps the Financial Secretary will set at rest my mind and those of the traders who have to deal with this matter.
At the moment precisely the same sort of situation is found with fish and chips, and the position on the railways is much the same. If a passenger buys a sandwich and then boards a train and eats the sandwich on the train it is, I presume, his own sandwich, and it will not be subject to VAT. If, however, he buys it at the bar on the train I presume it would be subject to VAT. The same thing applies to sweets and lollipops and chocolates. It is an absurd situation. The same situation applies in the case of house alterations and improvements. Many traders still do not know what the position is, and I imagine some of them would have registered if they were doing repairs exclusively. They may have registered and did not need to or, on the other hand, they may have registered because they thought they were zero rated when they were not. This is a serious problem.

Mr. Higgins: One of the amendments with which we are dealing is concerned with the refund of purchase tax to exempt traders and the other two with the extension of the time limit. With great respect, I think I would be quite out of order in answering the points that the hon. Member is making.

The Chairman: Further to what the Financial Secretary has said, I am in some difficulty. I have been examining the notes that I have about the meaning of the amendment and it seems to me that it is fairly narrow. It concerns the exemption of some people from the application of tax. As long as the hon. Member for Heywood and Royton (Mr. Joel Barnett) stays on that point I would think he will be in order. He should be careful not to go too wide.

Mr. Loughlin: On a point of order, Sir Robert. Surely it is not for the Chair to be prompted by the Minister. You will recall that I asked you at one point to define the area of discussion. Surely it would be invidious for us to get into a position in which the Chair is prompted by a Minister. If you examine the clause and the amendments you will not see
 

anything limiting in them. As far as I can see the deletion of the word "taxable" in the context of the clause would permit of a very wide debate.

Mr. Barnett: I appreciate the difficulty in which you imagine yourself to be. Sir Robert, because of the unfortunate intervention of the Financial Secretary. I can understand his being short-tempered, because he is probably being pestered by Customs and Excise officers at local level, and by local traders. But as my hon. Friend correctly said, if we are arguing whether a person is taxable or not we are on a wide-ranging subject. For a person to know whether the goods he is selling are taxable or not he has to know whether he is exempt or not under the terms of the Bill. It is most unfortunate that the Financial Secretary was so short-tempered.

The Chairman: These are difficult matters. Hon Members are. of course, experts in all these things, and the Chair has to do the best it can to measure up to that degree of expertise. I would be very foolish not to take some guidance from any hon. Member—Government or Opposition—that something that was being done was wrong. No doubt the hon. Gentleman has in mind occasions such as when the Chair says, "Thank you very much. I know how to keep order." I have probably said that myself many times. However, the Committee must understand that there was a doubt going through my mind which tended to be crystallised by what the Minister said. I hope we can now get on.

8.15 p.m.

Mr. Barnett: I am obliged, Sir Robert, for your words, because, like ourselves, you sat through all the debates last year. You therefore appreciate how wide is the difference between a taxable person and a non-taxable person.
I shall proceed with the point that I was making about the great problem of anomalies, which are central to the people whether they are taxable or not. I was taking the example of traders who sell bottled drinks. These drinks are now zero rated but sometimes they are sold in containers which are subject to a deposit. The traders who sell them are now extremely concerned—I have had letters from them—about the way in which to deal with the situation when
 


the container is subject to VAT. I should be obliged if the hon. Gentleman would deal with that point in his reply.
The Chief Secretary, instead of talking about birth pangs of the tax, should admit honestly that there is enormous confusion amongst all those who have to handle it. There can be little doubt about it. We know all about it from our contact as MPs, with traders and shoppers. Equally, if Treasury Ministers prefer indirect taxes—particularly those like VAT—and would prefer them to income taxes, they should say so honestly.
For goodness sake do not let them pretend that they intend to keep VAT at this level. Nobody would believe that even this Government would be so stupid as to introduce a tax that raises the same amount as the two taxes it replaces with all this confusion, trouble and problems. It would be absurd for any Government to introduce such a tax if they did not intend later substantially to increase it. I should be obliged if the Financial Secretary would tell us that this is what he intends to do. I do not think that he will do so, but I would be obliged if he would, for the sake of truth and honesty in the House.
I do not believe that the Chancellor or the Prime Minister can go on pretending that the tax cuts the Government have made are no flash in the pan. Of course, the Financial Secretary knows that real cuts other than those as a result of fiscal drag, mean that they should be either earned or the results of cuts in public expenditure. To pay for them out of borrowing only adds to the disillusionment of the public [interruption.] The Minister of State had better leave if he does not like hearing about the problems of VAT and taxation generally.

Mr. Nott: With respect to the hon. Member, he was not talking about the problems of VAT. He was not even talking about the clause, which concerns the purchase tax rebate. He was talking about the borrowing requirement, and that cannot come under the clause.

Mr. Barnett: I am surprised at the hon. Member. He was obviously not following my argument. I was talking about indirect taxes and the need to increase them under this Government.

The Chairman: I think I am beginning to get this thing clear. As I understand it, a taxable person has a particular meaning in the VAT sense. Therefore, that is the person we ought to talk about. I believe it concerns a limit on turnover of £5,000, or something like that, which hon. Members know far more about than I do. That is what we have to keep to. If the hon. Member for Heywood and Royton does not keep to the amendment I shall have to call him to order.

Mr. Loughlin: I am interested in this because I want to speak on the clause. So far I have not spoken on a single clause in the Bill. I draw your attention, Sir Robert, to page 4, Clause 4, with which we are dealing. In the left-hand column you will see a reference to:
Relief for tax or duty-paid stock held at commencement of VAT.
The First amendment with which we are dealing is,
Clause 4, page 4, line 38, leave out ' taxable' ".
If one relates it to the second amendment:
Clause 4, page 4, line 40, leave out ' April' and insert ' October ' ",
one sees that the commencement of VAT will be in October if the amendment is carried. Therefore, I infer from my interpretation of the clause and the amendment that this is indeed a very wide discussion of VAT. I wonder whether you would care to give me your interpretation, Sir Robert.

Mr. Barnett: I really find it difficult to understand this, because we are talking about a time situation, and it always widens a debate when a time situation is involved, and a type of taxable person. Apart from that, I did discuss this with your Clerk yesterday, Sir Robert. I asked him whether he would have a discussion with you with a view to having what is quite normal in our Finance Committee debates on the Budget—as on the last clause—a general debate. I asked whether you would mind a general debate on VAT. It was my understanding that that was to be the situation.

The Chairman: I am afraid that that was not exactly as I understood matters. I have no desire to get across the Committee or the Government in this matter. I am anxious that we should take matters
 


in as orderly a way as possible. The hon. Gentleman will be quite at liberty to raise the points he has if he relates what he is saying to the dates and goes on talking about taxable persons. That will be all right, but I hope he will not make it a wide debate, in the sense that the last one was.

Mr. Barnett: I am most grateful. I have a feeling that this might never have arisen had it not been for the bad temper of the Financial Secretary.
Perhaps I may revert to this aspect and its effect on taxable persons. The advertisements which the Government have published about VAT are not good enough. It is not good enough for the Government to publish advertisements about this tax which are wholly misleading and are indeed political advertisements. They must be terribly misleading to people who might or might not be taxable persons. I imagine that they are saving the Tory Central Office a fortune. It is absurd to suggest, as is suggested in the advertisements, that prices will not go up because of the introduction of VAT. We know that they will and we know that they have. I sincerely hope that the Chancellor will either stop publishing these advertisements or transfer the charge to the Tory Central Office.

Mrs. Elaine Kellett-Bowman: Is the hon. Gentleman aware that the Lancastria Co-operative Society— hardly a Tory Central Office-financed organ—inserted a very large advertise ment in the local Press to the effect that VAT would bring down its prices?

Mr. Barnett: The hon. Lady really must not be quite so naive. She must know that many stores on many occasions—

Mrs. Kellett-Bowman: This week.

Mr. Barnett: This week certainly, and next week and the week after, and next month, next year and a year after, we shall have advertisements telling us that people are cutting prices. But if the hon. Lady thinks they are going to cut prices across the board so that they will all lose money she is slightly more naïve than I had imagined was the case—although I may be doing her an injustice.
On the amendments themselves— [Interruption.] I see that even the Govern-
 

ment Whips do not like the truth about this tax. I am really astonished. I would have thought that they would be delighted to have a discussion on a tax which they have acclaimed as a wondrous one—which they have acclaimed as a great reform. I notice they do not say, as with other claims, that this is a simplification of our tax system. That would be the most surprising claim of all.
I do not claim that this is necessarily the best-drafted amendment there has ever been. It is possible that it is technically defective in certain ways but, as has always been the case in our Finance Bill Committee debates, whichever party is in Opposition, amendments are not necessarily drafted as, technically, they should be. But it tends to be only the Chief Secretary to the Treasury who takes a delight in saying how badly they are drafted.
I want to make it clear that it is the principle with which the Committee and I are concerned, and I hope that is what we shall talk about. If the Financial Secretary is prepared to accept it, it can be redrafted on Report.
The first point to understand about the first amendment is that if the trader is not registered he or she is not a taxable person. That is obvious. As it stands at the moment, that means that if he or she registers after 1st April 1973 and submits a return, he or she will not get a rebate of the purchase tax paid on the stocks held. These amendments seek to ensure that if a trader registers after 1st April and submits a return before the end of June he or she will still be able to obtain a rebate of the purchase tax on the stocks held. I submit that that should be on the date at which he or she registers, although I willingly concede that the amendment does not make that entirely clear. I would wish the purchase tax rebate to apply from the date the trader registers. If a person registers on 1st May and submits his return on 1st June he should be entitled to purchase tax rebate on the stocks he holds on the date he submits his return. That is what I should like to see, and I hope it is what the Committee would like to see.

[Mr. IFOR DAVIES in the Chair]

I entirely accept that the trader should have registered and is wrong not to have
 


done so, but I hope we shall stop this pious talk about what this poor devil should or should not have done. The fact is that most small traders, in particular, find it extremely difficult to understand this tax, and they are now finding it even more difficult to know what is zero rated, what is exempted and so on. They do not know from the statements that have been made whether, if the goods they sell have been relieved from tax, they should register. Many of them think that if their goods are zero-rated they do not need to register—

Mr. Higgins: Mr. Higgins indicated dissent.

Mr. Barnett: That happens to be the case, and it is no use pompously lecturing them and telling them that they should have registered. The penalty for failing to register is substantial, as we know from our debates last year. Why, on top of the penalty for failing to register, should traders have the further penalty of not being able to get rebates of purchase tax on their stocks? This is what these amendments seek to do.
Secondly, I put this to the Financial Secretary. If his answers to Questions are right and there are very few people left unregistered, I cannot understand what all the fuss is about. On 5th April the hon. Gentleman said in a written reply that it was estimated that approximately 1,100,000 traders had registered. The reply went on:
Checks by local VAT offices and other sources indicate that there was no serious shortfall in registration by traders liable to do so."—[OFFICIAL REPORT, 5th April 1973; Vol. 854, c. 156.]
I find this very difficult. If that is true, there is no one left to register and I cannot see why the Government cannot accept these amendments.
8.30 p.m.
What is really surprising is to find an error of 400,000 in the calculations. Originally, the Chancellor of the Exchequer said that the estimate was 1·5 million traders. Now we are told that 1,100,000 have registered and that there is no one left to register. This bodes ill for the right hon. Gentleman's statistics, If he can be 400,000 out, I wonder about the rest of his statistics.
We are entitled to a substantial explanation. We do not want just vague reasons for the error. We want to know how many companies grouped their accounts so as to have one registration for VAT. We want to know how many have been found to be exempt who were not previously thought to be exempt. We want to know why there was this major miscalculation. It is not a matter to be dismissed lightly. It is a major miscalculation, and we are entitled to know why there is this serious shortfall from the figure originally given to us which misled us into thinking that there were 1·5 million traders to register.
I come, then, to why the traders did not register. The probable reason is that many thought that they had a turnover of less than £5,000 in goods subject to tax, not realising that the zero-rated items brought them into registration. That is one of the major problems. The other is the fear of forms. Small traders, like most people in this country, have an enormous fear of form-filling. The same goes for the average taxpayer.
There is another major fear. It is the fear of snoopers. There are to be all these inspectors who will make spot checks. Perhaps we might be told a little more about them. How many inspectors will there be? How often will they be calling on registered traders? For what exactly will they be looking? Are they likely to be going in every year or every four or five years? For the bulk of the time, will the VAT officers and the Inland Revenue be exchanging information and checking whether the accounts of individuals agree with the returns submitted for Customs and Excise purposes? Will the system of cross-checking avoid the necessity of the number of civil servants rising much above the 6,000 total, and in this way will the number of snoopers be kept down to even below the 6,000 mark? The traders concerned and the non-traders who are likely to be checked under the workings of this legislation should be made aware of the answers to these questions. I hope that the Financial Secretary is ready to give a great many answers.
I have the feeling that the Treasury may be surprised at the amount of revenue yield that it gets not necessarily from VAT but possibly from income tax. I have the feeling that we are likely to


see a very much greater over-working of Inland Revenue staff as a result of back-duty investigations which are likely to arise out of the introduction of VAT than has yet been realised.
I come, then, to Amendment No. 4. This gives a trader a longer time to submit his return. It extends the period by three months. Instead of having to submit it by the end of April, he will have until the end of June. It is important here to understand the problems affecting traders having to submit their returns by the end of April. They have to deal with this problem, according to the clause, under Notice No. 748. I must say to the Financial Secretary it is extremely difficult for hon. Members in this House to deal with this problem when, for example, VAT Notice No. 748, mentioned in this clause, is not available either in the Vote Office or the Library; and neither are two other VAT forms which are required to enable traders to submit their returns. But, of course, we now know the form, and are able, eventually, to see exactly what traders have to deal with by 30th April.
It is not going to be very simple. For example, on page 5, in paragraph 8(a) it is stated:
If the amount of tax and the rate actually charged were £110 and 55 per cent. respectively and the rate applying to the goods on 7th November 1972 was 25 per cent. the amount of rebate which may be claimed will be £110 times 25 over 55, i.e. £50.
It is possible that most small traders will be able to deal with this quite easily but I doubt it. On top of that, by paragraph 9(f) they have not only to submit their returns by 30th April but must submit them in time to arrive not later than 30th April 1973, so they are dependent on the postal service as well. Heaven help them if they are dependent on that. They had better start posting them now.
We also know that it is not the small traders who will be dealing with these returns. It will be their accountants who will be doing so. The Committee will know my interest, and I would make it clear that from my experience, knowledge and contacts with colleagues in the profession they are madly overworked and will find it almost impossible to deal with these returns for traders so as to get them into the hands of the Customs and Excise by 30th April. I would have thought the
 

least that the Chancellor could do would be to give this relief, to extend the period, because I know what is likely to happen if he does not do so. MPs will be inundated with complaints from their constituents because their returns have not been got in in time and they are not allowed to obtain the rebate of purchase tax to which they are genuinely entitled.
I hope the Financial Secretary is prepared to accept the amendment, because if he does not do so he fails to recognise the confusion that reigns at the present time among the traders and accountants who have to deal with the problems. I believe I have grossly understated the situation. It is a shambles. It is almost impossible to obtain information quickly from local Customs and Excise officers. Customers, traders and the Customs and Excise are "bewitched, bothered and bewildered"—and those are not my words. They are taken from the Manchester Evening News of 7th April quoting words by a very charming lady who was quoted to us before in aid of the Chief Secretary, Mrs. Regina Dollar—

Mr. Nott: A very important lady.

Mr. Barnett: —who incidentally—and the hon. Gentleman should not laugh-is the chief national organiser of the National Consumer Protection Council. She said things went wrong because of the confusion; and this is what we have, confusion. So it is only fair for the Chancellor to make it a little easier for all these traders, their professional advisers and the Customs and Excise officials themselves who have the appalling task of trying to deal with this tax. Give them a little extra time. Let them have at least until 30th June to submit their returns.

Dr. Tom Stuttaford: Yesterday afternoon when we were discussing the disabled I managed to ask a question in an intervention, and I know that the hon. Member for Norwich, North (Mr. Wallace) was also hoping to catch Mr. Speaker's eye but failed. I only seek to bring to the knowledge of the Treasury another cruel and heartless anomaly which has occured in VAT. This has had its effect in Norwich and needs rectifying immediately.
I refer to the problem of a kidney machine bought by public subscription
 


or by donations. If a machine is prescribed under the National Health Service and is bought by the State, no VAT is payable. On the other hand, if one happens to live in a community which shows some regard for its disabled and collects the money needed to provide the machine, one finds that it is eligible for VAT. A kidney machine which a fortnight or three weeks ago cost £2,500 today costs £2,750.
I should like my hon. Friend to visualise the predicament of a man who expected to have his machine delivered last week at a certain cost. He now finds that the funds which have been collected by diligence and hard work are no longer sufficient to purchase it. The machine has now been thrown out of that price bracket by the addition of VAT.
This anomaly does not apply only to this machine. It applies to all hospital equipment which may be bought by voluntary public bodies, such as the friends of various hospitals, or by communities who care for the aged. This anomaly will occur more frequently in the future, and I hope that my hon. Friend who will reply on behalf of the Treasury will say that this anomaly has been overlooked by his Department and that he will take immediate steps to put it right.

Mr. Dalyell: I wish to speak to Amendment No. 3.

Mr. Loughlin: Really! The fourth time!

Mr. Dalyeil: I shall be brief. The amendment is in my name.
I should like to echo much of what was said by my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). Many small traders are deeply worried by the problems which they now face. If it had been necessary they would have "lumped it", but many people now believe that this provision was unnecessary in the first place and that it is certainly wrong that it should be rushed through so quickly.
I wish to refer to a Miss Cooper who runs a small catering establishment in Linlithgow, where I hold my surgeries. On Saturday Miss Cooper told me "At my age in my sixties I am too old to start worrying about all this." The fact is that Miss Cooper, like many other people, has become used to the tax system
 

which has stretched over her lifetime, and she now faces a great deal of extra work.
Then there is the owner of the garage which looks after my car. That gentleman told me "I spend three hours every morning working out the implications of VAT." If this provision were necessary as a result of our entry into the Common Market or for any other reason, one might have understood the situation a little more readily. However, many of us who sat through the proceedings on last year's Finance Bill believe that this provision is not necessary under EEC regulations and that, as my amendment seeks to achieve, more time is necessary.
To save time, I wish to concentrate on two issues. The first concerns the situation of charities in face of VAT. Perhaps this can be best outlined by quoting a letter of 22nd March from the National Council of Social Service, signed by Mr. J. K. Owens, its Director. Mr. Owens quotes the words of Sir Philip Allen, Chairman of the National Council, in a letter to the Chancellor of the Exchequer:
There is no point in disguising the fact that the National Council is deeply disappointed with the small size of the concessions given towards VAT. We were surprised that what seemed to us to be a very strong case based on a professionally compiled survey of the effect of VAT on 52 charities did not convince you of the need to give more general relief. In your speech to the House you said ' Perhaps the greatest anxiety about the effects of VAT on charities has been in respect of sales of donated goods.' We can only assume from this statement that we have completely failed to put over to you the real priorities for relief.
8.45 p.m.
He says that this is insignificant when compared with the £472,670 of non-deductible input tax, less savings on SET and purchase tax, which the 42 charities will have to find. This non-deductible input tax is 4·4 times greater than the benefit from the abolition of SET and purchase tax, and I therefore ask the Financial Secretary to comment on that. Is it fair to say that the abolition of SET and purchase tax for charities will in any way counter-balance the introduction of VAT?
I shall not quote the whole letter, but will refer to only one other comment. He says:
We are most disturbed by your restriction of the donated goods concession to charities
 


established for the relief of distress. Many charities outside this category can but view this categorisation with alarm and concern as to whether it will eventually lead to an erosion of their existing tax concessons. We also fear that the application of this categorisation will give rise to extensive litigation.
I should welcome a Treasury comment on that.
The second issue, which I shall put briefly because the Treasury must know the arguments, concerns motor cab proprietors. In a letter dated 19th July 1972 to the then Financial Secretary to the Treasury, the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), the secretary of the association said:
On page 1620 "—
and he refers to me—
is right in saying that as soon as it all becomes Law and effective there is no doubt that overnight London will be deprived of many cabs which are available for hire in the usual way.
I shall not read the letter at length or the reply of 11th August to the Secretary of the London Motor Cab Proprietors Association.
I do not have a car in London, and I am sometimes dropped by taxi in New Palace Yard. When it is discovered that I am a Member of Parliament, almost inevitably there is a cri de coeur from the cab driver on the subject of VAT. I have seen the reactions of my hon. Friends the Members for Birmingham, All Saints (Mr. Brian Walden) and Dudley (Dr. Gilbert). Ministers are in a special privileged position, with official cars because they may benefit from the advice of their drivers, as Ministers do from time to time. They do not have this problem, but when it is discovered that the passenger in a taxi is a Member of Parliament the driver goes on and on about VAT.

Mr. Higgins: If the hon. Gentleman takes a taxi tomorrow and is asked the question he will be able to reply that the amendment debated yesterday had nothing to do with this problem.

Mr. Dalyell: It depends on whether it is a taxable person. The Financial Secretary is being a bit narrow about this, because he knows that this is the only chance to raise the question of VAT. All this reveals is that the hon. Gentleman
 

is a bit sensitive on the subject. He does not want it to be discussed. I take a ruling from the Chair that it is not to be discussed, but I shall not take it from the Financial Secretary. That being so, I refer to this correspondence of 19th July and 11th August and ask for a Treasury assessment of the position in relation to the cab trade.
There are others who wish to speak, and I shall therefore not go on any longer. I should like the Financial Secretary to deal with the two issues that 1 have raised.

Mr. Peter Trew: I should like to take up what was said by the hon. Member for West Lothian (Mr. Dalyell) about the haste with which VAT was introduced. It was first announced in the 1971 Budget. There followed a full year of discussion on a Green Paper, and then the matter was debated at great length in a Standing Committee on which the hon. Gentleman was a member, as were many who are present in the Chamber tonight. I remember the introduction of SET in 1966. It was an entirely new tax, and very little time was provided to prepare for it.
One thing which interestd me in the remarks of the hon. Member for Heywood and Royton (Mr. Joel Barnett) was the change which they represented in his attitude to the tax. A year ago he and his right hon. and hon. Friends were asking for a wide extension of the reliefs and exemptions, for this and that to be rezo rated, but tonight the hon. Gentleman is complaining that too much has been relieved and that the tax is no longer broadly based. Indeed, he scoffed at the description of the tax as broadly-based and referred to the wide-range of zero rating. He is right. VAT now has the widest reliefs of any VAT in Europe, and the lowest rate.
The impact on the average family budget is not without interest. An analysis of the 1971 family budget survey shows that 52 per cent. of the average family budget now escapes VAT either through zero rating or through exemption, but the poorer the family the higher is the percentage that escapes VAT. For the poorest families in the range of £10-£15-a-week income the percentage of the budget free of VAT goes up to 66·5 per cent. That refutes any suggestion
 


that the tax is regressive. But the Opposition ceased to argue that it was a regressive tax a long time ago.
The hon. Member for Heywood and Royton made much of the initial teething problems of the tax, but after 10 days it is a bit premature to say how it will affect the cost of living. Many price reductions have been announced. The hon. Gentleman scoffed at the suggestion that the saving through the abolition of SET would be passed on, but the most authoritative estimate of the effect on the cost of living, produced by the National Institute last May, was that if only 40 per cent. of the saving was passed on there would be an increase of 1·1 per cent. in the cost of living.
Savings in SET are passed on. My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) has quoted her experience of the Co-op. I have not been to check up at my local Co-op, but when SET v/as halved about a year ago there was a notice outside it saying "The reduction in SET enables us to offer double dividend stamps to all our customers." I congratulate the Co-op on the speed with which it is passing on the savings in SET to the consumer.
The further reliefs in this year's Budget on children's shoes and clothing and on confectionery and soft drinks mean that the effect on the cost of living is broadly neutral. There should be no net increase.
I have heard very few people come out against the relief of confectionery and soft drinks. Most families welcome it. Strangely enough, the only dissident note I have heard comes from flower growers. My constituency is an important horticultural area. I have many flower growers, and they have objected most strongly to the relief of chocolates, for the good reason that when a man is feeling romantic he buys his girl friend or his wife a bunch of flowers or a box of chocolates. Before 1st April chocolates were subject to 18 per cent. purchase tax, equivalent to 12½ per cent. on the retail value, and flowers were not taxed. Now chocolates are untaxed and flowers are subject to 10 per cent. VAT. The flower growers argue that the competitive position of flowers compared with chocolates has deteriorated by 22½ per cent. They may have a point there.
The flower growers are worried about how VAT will work in the mechanism of the market, particularly at Covent Garden, and fear that it will come out of their margins. I hope that my hon. Friend the Financial Secretary will keep a close watch on the matter and satisfy himself that their fears are groundless.
The hon. Member for Heywood and Royton asked "Why replace purchase tax and SET with VAT when it yields exactly the same amount of revenue?" In the first year it does. Purchase tax and SET are non-buoyant taxes, because the goods subject to purchase tax each year form a progressively smaller percentage of consumer expenditure. But VAT is a buoyant tax. With no increase in rate it will each year yield more revenue. The result will be that the present tax system—the combination of the unified system, corporation tax and VAT—is a more buoyant system than previously. This will be widely welcomed by future Chancellors of both parties. For that and other reasons, I welcome the introduction of this tax, which is a neutral, fair and efficient one.

Mr. Loughlin: I was fascinated by the remark of the hon. Member for Dartford (Mr. Trew) that VAT is a buoyant tax. The tax revenue can increase year by year. The only question that arises in my mind is: who pays? If the tax revenue increases year by year, somebody must pay it; namely, the generality of the population. One can only assume that the section of the community which makes the greater number of purchases pays the most.
Previously the hon. Member talked about VAT being a great advantage in that 52 per cent. of average families will not be affected by it. When the hon. Member went on to say that the poorer families benefit more from VAT, I wondered where he lived. If he thinks that the abolition of SET and purchase tax represents two contributory factors to relief to poorer families by VAT, I would ask him to consider two matters.
First, SET is of little consequence to prices in the shops. The impact per pound of sales of any retail unit will be found to be so small that it will be virtually impossible for the retailer to pass on the relief from SET to the consumer.
I have been in distribution for many years. I know as much about distribution, distributive costs and pounds per sale per unit of employment as anyone in the Committee. I can tell the hon. Gentleman that irrespective of the current advertisements of the cuts being made as a result of the elimination of SET—just as when the Government removed 50 per cent. from SET—the information is phoney. If the hon. Gentleman looked at general price ranges in any distributive unit advertising reductions resulting from SET, he would find that, although there would be a reduction on specific items on any counter, likewise there would be a counter-balance. It is virtually impossible, unless an organisation has an enormous total turnover, for anyone in distribution, on the basis of individual items or commodities within the shop, to transfer any savings that may have been made on SET.

Mr. Trew: The hon. Gentleman said that purchase tax and SET do not affect the ordinary shopper. The total purchase tax and SET charged on food alone was £100 million. If he thinks that sum is insignificant, I am certain that the British public do not.

9.0 p.m.

Mr. Louglin: If the hon. Gentleman will relate the £100 million to the total number of items within each unit of distribution and the number of distribution units throughout the country, employing about 1½ million people, he will see the insignificance of the impact of SET on the total turnover. In the main, purchase tax was payable on luxury goods on a variable basis.
When the hon. Gentleman talks about poorer people, I do not want him to be hypocritical. I do not want him to try to con his constituents. The poorer the people, whether they are £15-a-week hospital workers or pensioners, the more adversely will they be affected by VAT, whereas they have not been adversely affected by SET or purchase tax.
I am sorry, Mr. Davies, that I have had to devote so much attention to the hon. Member for Dartford. He obviously knows nothing about distribution. As I have spent the whole of my adult life in distribution I felt that I could impose upon your generosity for a moment. Before you came into the Chair, there
 

was some discussion about the width of the debate on the three amendments which we are discussing—

The Temporary Chairman (Mr. Ifor Davies): Order. The House will recall that the Chairman made an appeal to hon. Members. Although he was prepared to allow a certain amount of wide discussion, he hoped that the debate would not go so wide as the earlier debate. I repeat that appeal.

Mr. Loughlin: I am grateful to you for intervening, Mr. Davies, but the Chair has no right to make an appeal to the Committee. I say this very respectfully. The Chair can interpret the rules only in accordance with the Standing Orders and procedures of the House of Commons. I was about to come to the three amendments, and, no matter who had occupied the Chair, I would have made these submissions. There is nothing persona! in them.
Clause 4(7) refers to spirits, wines and cigarette lighters and earlier subsections deal with other issues in relation to purchase tax. I doubt whether there is intellectual capacity on the Government Front Bench so to have designed this, knowing the way in which it has fallen. It seems that this is a completely wide issue in which one can reopen the whole case for VAT.

The Temporary Chairman: Order. I must point out to the hon. Member that we are discussing not the Clause but the three amendments, Nos. 2, 3 and 4. Those are the amendments before the Committee.

Mr. Loughlin: That is obvious even to me. I am very immature and naive, but I suggest that it is impossible to discuss amendments without relating those amendments to a clause. If we relate the amendments to the clause we have obviously to discuss the clause because we are dealing with the difference between the clause as it is and the clause as it would be if amended. If you say, Mr. Davies, that we are dealing with amendments but not with the clause, that seems to be stretching one's imagination a little too much. We cannot deal with the amendments without taking into account the effect of the amendments if carried and the effect of the clause as so amended.
Two or three times the Financial Secretary intervened in a rather petulant way, which was out of character with his attitude outside the Chamber. He sought to argue that my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) could not discuss VAT. I put to the previous occupant of the Chair that we are talking about relief from tax or duty on goods held at the commencement of VAT. We go on to discuss a further amendment on extension of the period of time. It seems that in those circumstances we can do three things. We can talk about stock which carries purchase tax, we can talk about stock which involves SET—

Mr. Higgins: Mr. Higgins indicated dissent.

Mr. Loughlin: Oh, yes; because we are talking about an extension of the time from April, when VAT came into effect, to October. In the shops and the warehouses during that period stock carries purchase tax. In consequence of carrying this amendment, there would be stock which involved SET. Therefore, we are entitled to talk of the whole gamut of purchase tax, SET and VAT.
If I may very respectfully remind you, Mr. Davies, the hon. Member for Dart-ford, without let or hindrance from the Chair, was allowed to talk about both purchase tax and SET. There was no interference or ruling out of order. What applies to one hon. Member should as a cardinal rule apply to every hon. Member.

The Temporary Chairman: Order. The hon. Member has not been ruled out of order but I ask him not to make the debate too wide.

Mr. Loughlin: This is true. I put it respectfully again that the Chair has no right to ask me not to make the debate too wide. The only right and responsibility of the Chair is to determine whether I am in order or not.
We are dealing witth a series of amendments relating to value added tax. My hon. Friend the Member for Heywood and Royton referred to the addition of VAT to restaurant bills. One day last week my wife picked me up at Gloucester, and, having arrived fairly late, we decided to have a meal before going home. We went into a very good restaurant, the Speech House in the Forest
 

of Dean. It is well worth a visit by any hon. Member. I might as well get a commercial in. It is run by Trust Houses Forte Ltd. When I got my bill I worked out that I had been charged X amount for the meal—there was no deception on the part of the management; it was quite categoric—plus 10 per cent. service charge plus 10 per cent. VAT. It was 10 per cent. VAT not only on the food, but on the service. People say that this is all right and that there is an allowance for SET because the service industries are subject to SET. It is no use the Minister telling me that VAT is a substitute for purchase tax and SET if in almost the first week of its operation I am charged the full 10 per cent. not only on the meal but on the service that is provided. I noticed that the 10 per cent. service charge was lower than the 10 per cent. VAT There was no allowance for SET.
I have great respect for the manager of the hotel. I am not in any way criticising him. He is no doubt carrying out the policy of the company. He is a first-rate fellow, and I get very good service when I go into the hotel. It is essential that I am fair to the manager. My local papers may pick this up. If not, I will send it to them.
It is no use the Minister telling me that VAT to some extent compensates for the elimination of SET, because it does not. He knows as well as I do that, whilst it is all right now to talk about its being restrictive in certain areas, his hon. Friend the Member for Dartford was correct in what he said on this matter. Although there is zero-rating and exemptions now, VAT will be extended to food at the next Budget.
9.15 p.m.
I do not believe, now that the Government have got away with the introduction of VAT, that they will fail to apply it across the board in the same way as it has been applied in every Common Market country. That is because a percentage of our VAT must be paid to the Common Market. Once the Common Market finds that we can pay a greater percentage on the basis of an across-the-board application of VAT, we shall be pressurised into implementing such a system. If we cannot get away with the butter issue, we shall not get away with not imposing VAT on food.

Mr. Trew: The hon. Gentleman is misquoting me if he is suggesting that I said VAT would be imposed on food. If he reads HANSARD carefully he will find that I suggested there would be no increase in coverage or rate. I said specifically that without any increase in rate the revenue would increase year by year.

Mr. Loughlin: I apologise to the hon. Gentleman if I conveyed that impression. I did not for one moment wish to suggest that he advanced the idea that VAT could apply to food.
I do not know for how long the hon. Gentleman has been in this House. I have seen Budget after Budget. Some Conservative hon. Members may say that I have been here too long. I know that a tax is never removed. A tax is always extended irrespective of which party introduces it. I will gamble that within five years, which is a short time, we shall have VAT imposed across the board on foodstuffs, children's clothing and everything else.
VAT is an easy tax to apply and is very buoyant. It is, in the long run, a tax that is cheap to collect, although I know that 7,000 additional civil servants will be required. It is easy to adjust the rate. The rate is 10 per cent. at present, but there is nothing to stop any Chancellor setting a rate of 12 per cent., 13 per cent., 14 per cent., or 15 per cent. Rates of that kind would not be unusual in the context of the Common Market, and the same collection costs would apply. That is the danger of VAT.
I know that I may have strayed a little. All that I will say is that I am opposed totally to VAT. It is a scandal that it has been imposed upon charities. It is more than a scandal that a lot of sports and athletic societies in Britain will go out of existence because of the imposition of VAT. It is to the dying shame of the Government that they introduced a tax that taxes generosity, people's enjoyment and everything else. The Government described the last Labour Government as the Government which liked to impose misery on people. They have imposed the misery this time.

Mr. Knox: I shall not detain the Committee for as long as the hon. Member for Gloucestershire, West (Mr. Loughlin). I can only assume that having dined out
 

last Friday night the hon. Gentleman was extending our proceedings to enable some of his hon. Friends to dine out tonight.

Mr. Loughlin: Where?

Mr. Knox: That I cannot tell the hon. Gentleman.
The hon. Gentleman said that Governments never took off taxes. I remind him that my right hon. Friend the Chancellor removed purchase tax and did not impose any other tax on a wide range of foodstuffs.

Mr. Loughlin: VAT.

Mr. Knox: My right hon. Friend has not put VAT on any foodstuffs, except meals bought in restaurants, and so on. He has removed indirect taxes from a wide range of foods. Had he not done so, I imagine that the hon. Gentleman and many of his hon. Friends would have been making highly sentimental and sloppy speeches about a wicked Tory Government who were taxing children's sweets, and so on, as did some hon. Members of the present Opposition when sweets and such things were first taxed.
The hon. Member made great play of the insignificance of the contribution of selective employment tax to distribution costs. This amount of money was spread over a wide range of things. The selective employment tax which the present Government inherited in June 1970 was bringing in a large amount of revenue. In the last analysis, that was obtained from the consumer. Let no one kid himself that employers were paying this out of profits. It came from consumers. Though the amount contributed to total costs by selective employment tax was small on each item, the tax was spread over a large range of items. A small amount of money over a large number of items was significant to individual consumers in total.

Mr. Loughlin: I take it that the hon. Member recognises that SET was related to the cost of the unit of employment, be it male or female. If one takes the sales per unit of employment as, for example, £200 a week in a supermarket— a low figure—will the hon. Gentleman say what was the ratio of SET to the £200 of sales?

Mr. Knox: I cannot tell the hon. Gentleman that. But SET was bringing in a very large revenue. It was not the
 


employers who were paying it; it was the ultimate consumer. The hon. Gentleman is deluding himself and trying to delude others if he pretends that it did not have an effect on prices. Of course it did. When it was halved this reduction was only one of a number of factors which went into the determination of prices. Other factors were moving in an upward direction, and it was not immediately apparent to the ultimate consumer that half of SET had come off. If my memory is correct, about £1,200 million came in through SET in 1970. The consumer was paying that amount. The hon. Gentleman is kidding only himself if he pretends otherwise.
The hon. Gentleman also continued the hoary old myth that purchase tax was levied on luxuries, and that the items which poor people bought were not subject to purchase tax. But the hon. Gentleman is living in a strange world if he thinks that items such as radios, electric fires and television sets, which were subject to purchase tax at 25 per cent., are not bought by people who are quite poor. I am very pleased that they are bought by such people. These commodities were subject to 25 per cent. purchase tax. Ordinary people were paying for them, and now that value added tax has taken the place of purchase tax there will be a reduction in the tax which people will pay in such items.
I now turn to some of the remarks made by the hon. Member for Heywood and Royton (Mr. Joel Barnett) earlier. He spoke about the difficulties which the public have in making calculations about purchase tax and selective employment tax coming off and value added tax going on. He said how difficult it was for people to know exactly what prices should be. He made the point—which was quite legitimate—that most people were not prepared to shop around and carefully to measure prices in one shop and then in another, so as to ensure that the correct prices were being asked.
I agree that most people do not do this, but it is not necessary for everyone to take this action to get the right result. It is sufficient if one or two people check prices in this way. The hon. Gentleman also spoke about letters which he has received from constituents. I had a letter this morning from a constituent—a lady
 

—who had queried a price in a particular shop and, after making inquiries, found that the price was too high. She returned to the shop and got the price reduced. She is not the only one who will benefit from this: everyone else will who buys the item concerned.
It needs only a minute proportion of people to do this to put on the spot shopkeepers who may be chancing their luck. It is not necessary for great masses of people to do this. A handful of discriminating shoppers will achieve the objective.
The hon. Member for West Lothian (Mr. Dalyell) made a great deal of the difficulty which many people have had because of the introduction of value added tax. There is a lot of truth in this. It is very awkward for people. But it was also awkward when selective employment tax and decimalisation were introduced. But the logic of this argument is that we should never change anything, that we will carry on until the end of time with things as they are. This attitude is the ultimate in conservatism. I am a Conservative with a big C and it is not the sort of conservatism which appeals to me.
My hon. Friend the Member for Dartford (Mr. Trew) challenged the argument that value added tax had not been properly discussed. As my hon. Friend said, that argument does not stand the slightest examination. The decision to introduce value added tax was announced in the 1971 Budget. Twelve months were spent discussing the Green Paper, the tax appeared in the 1972 Finance Act, it was discussed at length in Committee on that Act, discussions have continued throughout the past 12 months, and now, two years after it was announced, it has become operative. No other tax in our history has been discussed at length in this way.
I am not as enthusiastic as some of my hon. Friends for tax changes. I hope that, with all the tax changes which have taken place, there will be a long period of stability with no further changes. But the criticism of hon. Members opposite that value added tax has not been fully discussed does not stand the slightest examination. The Opposition have a cheek beyond belief to make such a criticism when one compares the length
 


of the discussion on value added tax with what happened when selective employment tax was introduced.

Mr. Arthur Blenkinsop: My hon. Friend the Member for West Lothian (Mr. Dalyell) has directed attention to some of the acute problems affecting many charities. 1 want to speak about the extraordinary situation which arises with an organisation such as the Youth Hostels Association, with which I have been connected since the time I helped to form it before the war. The Youth Hostels Association has been able to develop and progress for many years, and this is the first time that a Government have taken steps which are seriously damaging to it.

9.30 p.m.

[Mr. E. L. MALLALIEU in the Chair]

We would all pay a tribute to the work of this body over the years, but there are acute dangers that this work will inevitably be limited by the operation of VAT. This matter is directly relevant to the amendments under discussion. We are concerned here with a body which is obliged to apply VAT both to its membership fees and to its overnight charges. It is also involved in paying VAT on stocks of food that it might supply for self-cookers, as well as for meals provided and also, in some cases, for some bedding which may be hired to those using the hostels.

The extraordinary situation has arisen that some of the youth hostels are seriously discussing whether they should form a series of separate companies, one for each small youth hostel, in order to secure exemption so that they would not have to register and so escape the problem of tax with all its nonsense and absurdity. That would leave them in the position that some small hostels with relatively minor facilities would not have tax imposed upon them. But the larger hostels which are most likely to take school parties, scout parties and many other groups of that sort will be caught by the tax. So there would be the anomaly that there would be different tax treatment for different parts of the movement.

There is the extreme probability that some of the larger and more important
 

hostels will certainly lose a number of bed-nights, the number of people coming to stay, because of the increased charges. I have a whole string of correspondence— and how hon. Members on the Government side have not had such correspondence I cannot understand—from scout groups and highly responsible people of all kinds of political complexion and none, all insisting on the great damage their movement will suffer because of the way in which the tax is being applied.

I should have thought that we would all want to assist and help a body to which Governments have at all times in the past been helpful. Now we have this extraordinary situation of a body being driven to try to find ways out of its difficulty by the absurd proposal to form a whole mass of separate companies. I think it illustrates the absolute madness of some of the implications of the tax. I do not necessarily rule out the tax automatically from all spheres of activity but any application that can result in this type of situation cannot but be condemned by all of us.

Here is a case which shows that we must consider again which bodies are to be taxable and which are not. If any body should not be taxable it is surely an organisation such as the youth hostel movement. I have the interest of being president of a section of the Youth Hostels Association, having been involved in its formation in 1929 and 1930, and it is disastrous that one sad effect of the tax will apparently cause great difficulty for its future development and operation.

Mr. Duffy: I shall speak briefly, first of all about the unusual difficulties that have attended the operation of value added tax during this first week by way of showing something of its impact on the public and how the feedback to the small trader has compounded his difficulties and how working conditions render it necessary that the trader—who has, after all, to act now as the final collector of value added tax—should be given the further respite that we plead for in our amendment No. 4.
On 7th April the Sheffield Star ran a headline describing the first week's operation of VAT as "sheer murder" for both Customs and Excise in Sheffield and the staff of the corporation's department of trading standards. Customs and Excise
 


received an average of 700 inquiries a day. I am wondering whether the Financial Secretary will say a word later on about the number of inquiries that Customs and Excise in certain parts of the country received last week.
A spokesman was reported as saying:
The public think they are being overcharged, and the shopkeeper is worried about collecting enough money to pay the tax.
So there were worries on both sides.
In the Sheffield department of trading standards where a section has been allocated to deal with VAT problems. Its chief inspector said that the biggest problem area has been, as has already been stated, in cafes, restaurants and canteens, where it is difficult to add 10 per cent. to low-priced orders.
Typical problems that Customs officers have had to deal with in Sheffield have been: first, from builders and contractors, because maintenance and repair work is taxed at the standard 10 per cent. while construction, alteration and demolition are VAT free; second, from traders who do not have to register for VAT because they have a turnover of less than £5,000 a year but who are not sure what their position is; third, from secondhand car dealers and buyers who are not sure what they should be paying VAT on—it is the difference between what the dealer buys it for and what he sells it for—and, fourth, from a bemused and bewildered public.
I want now to refer to the special difficulties that hamper traders many of whom have had to acquire tills—some more than one. Indeed, some have been reported in the Press as having had to acquire three tills. These are extremely expensive on any showing, and for such small traders they represent a very difficult position.
I wonder whether the Financial Secretary will give further consideration to some form of relief for these traders. After all, they will be doing his job, or that of the Government, as tax collectors from now on, and he must know that they are scarcely equipped for this. Most of these small traders—unlike, say, Marks and Spencer—have never really had to cope with paper work before. I know this has been said again and again in the House during the past year, but for
 

many of these small traders last week brought an explosion of paper work, and I have been told that, with all the good will they can muster, when it comes to making their weekly and then their quarterly returns, to quote one, it will be "God help Customs and Excise", which will have to work them over. I hope, therefore, that Customs and Excise will go very carefully in the first year and will make every allowance.
It is, of course, the accountancy profession that will have to bear the brunt of this state of affairs in the first year. Already accountants are almost completely snarled up with VAT. Some accountants of my acquaintance have done nothing but VAT since Christmas. I suspect that in the end it will be the same accountants who will have to complete those quarterly returns. Their clients will still not understand them, and I can imagine at the end of the quarter most accountants' offices having a queue of many small traders.
I want now to refer especially to such small traders as newsagents, and I express my gratitude to the Chancellor of the Exchequer for his understanding of their problems in the past and for the expeditious manner in which he has dealt with their representations. But, grateful though many newsagents were for the right hon. Gentleman's decision to zero-rate confectionery and chocolates, it upset all their calculations. Those of them who had settled for scheme 2 found, as they saw it, that variations were necessary. Along with the Confectioners' Association they arranged a meeting with Customs and Excise officials on 20th March, when yet again they met with considerable sympathy. However, they went away with the feeling that this was a matter which would have to be settled now at ministerial level. Their fear is that at ministerial level there will be a resistance to further change if for no other reason than that enough changes have been made already and that now is the time for schemes to start working.
I hope that the Chancellor of the Exchequer will accept that there must be reservations on the part of small traders about scheme 2, given the relief on a large area of stock held by certain of them. This is true especially of newsagents, whose organisation, the News Agents' Federation, is wondering whether
 


its members are not being strung along. It is for that reason that I ask the Financial Secretary to assure them that Customs and Excise will give their latest representations the most serious consideration.

Mr. Dempsey: I wish to raise two points of principle in respect of which I look forward to hearing the comments of the Financial Secretary. Some time ago I attempted to table a Question to the Chancellor of the Exchequer about the operation of VAT on voluntary organisations. I was advised that it was not acceptable and that the matters should be raised when it was debated in the House. Tonight, as we are debating it in Committee, I raise these two points.
I understand that it is customary for hon. Members to declare their interests. I am Vice-President of the Scottish YMCA and Chairman of the Coatbridge and Airdrie branches, those being two towns in my constituency. I assure the Committee that all three offices are honorary and unpaid.
In our efforts to raise funds for the YMCA we have come up against a serious problem. Our buildings received capital grants from the Secretary of State for Scotland and from local authorities. Our annual expenditure is grant-aided, in that the remunerations of our full-time general secretary and our part-time cleaners are grant-aided by the local authorities. This means that we must have certain organised ventures to raise sufficient money to balance our budget, which so far we have been unable to do. If, from any of our efforts, we have to contribute to VAT and thus to the Exchequer we shall have to ask the local authorities for increased grant aid.
When we organise voluntary functions such as sales of work and garden fetes, we should like to be assured that VAT will not be charged to those who serve, supply and sell at those activities in a voluntary capacity. At the moment we are not clear on the issue. I wonder whether the Financial Secretary can now give me an absolute ruling on the matter, or, if he cannot, whether he will write to me confirming that such undertakings as the voluntary work of the YMCA are totally exempted from VAT. I believe the organisation—not only in my constitu-
 

ency but throughout Scotland and, indeed, the United Kingdom—would be grateful to hear the views of the Financial Secretary in this respect, and would be delighted to receive from him a ruling that these operations are totally exempt from VAT.
I want to raise a second point and to refer to some anomalies which have arisen—one only within the last two weeks, since the tax became operative. A constituent of mine uses the sauna bath in a local authority swimming pool. The local authority is not one of mine and the swimming pool is outwith my constituency. My constituent claims that the cost to users of the sauna baths has risen by one-third—from 60p to 80p. He advises me that the local authority concerned decided to spread the cost of VAT not over all the users but only over adults using the swimming pools and sauna baths. Those who are not adults are excused, and since they are not paying their 10 per cent. levy the result of the local authority's spreading the whole cost over adults using the swimming pools and sauna baths is that the cost has risen by 33⅓ per cent., instead of 10 per cent.
My constituent is complaining bitterly about this, and wants to know whether it is right or wrong, legal or illegal, and whether it is in accordance with the tax now being operated in this country or is in conflict with it.
There must be several other teething problems of this nature affecting VAT. I recognise that it is a new tax and that we are bound to have such experiences. It is obvious that the tax is very complicated, and in many respects unfair. It seems to me that now that it is in operation the Minister should make every effort to answer some the points I have raised. Like my colleague who spoke earlier, I am a former youth hosteller and I recognise what this means to the Youth Hostels Association in Scotland, quite apart from England and Wales. We are entitled to an unequivocal answer, if not tonight then as soon as possible, explaining how VAT operates or applies to the undertakings I have mentioned.
If the Financial Secretary cannot do what I have requested I hope he will let me have a reply on the points I have raised as soon as possible, because in my part of the country this tax is causing considerable concern to most people.
 


They find it extremely complicated and feel that in certain respects it would require almost a Philadelphia lawyer to explain it to them.

Mr. David Stoddart: I want to raise only one major point. I was very surprised to hear that hon. Members opposite had not had representations about this tax, because undoubtedly people are "bewitched, bothered and bewildered" about it at the present time. Some of the anomalies are so great that people are writing to me in great numbers. Only this morning I had a letter from a women's organisation asking me to protest very loudly and clearly about the tax on women's sanitary wear. I hope that the Financial Secretary and the Chancellor of the Exchequer will take note of the early day motion on that subject.
The major point that I wish to raise— and I have written to the Financial Secretary about it—relates to the anomaly which arises on the work of voluntary radio associations. In my constituency a voluntary association runs the hospital radio service for the benefit of patients. Because of the imposition of VAT on telephone charges this association which provides a voluntary service, finds itself having to pay an extra £30 VAT on the rental of the private line, which amounts to £300 per annum. I feel sure that the Government and the Financial Secretary will agree that this anomaly penalises voluntary workers and that if, because of financial difficulties, the voluntary workers are unable to continue, hospital patients will be deprived of a valuable and valued service. I hope that the Financial Secretary will do his utmost to see that this anomaly is corrected.

Mr. Higgins: I shall seek to answer the points which have been raised on these amendments. I do not think the Committee could reasonably say that I have on any occasion been reluctant to extol the virtues of VAT or its advantages over purchase tax and SET. I hesitate to calculate the number of columns of HANSARD I have filled on this subject in the past two or three years.
We have before us three specific amendments related to Clause 4, which is concerned with rebate of purchase tax consequent upon the changeover. I should like to deal with one point which was made by the hon. Member for
 

Heywood and Royton (Mr. Joel Barnett) about the mechanics of the matter.
I am always concerned when hon Members say that a particular document is not available for a debate. The hon. Gentleman referred to Notice 748, which he said was neither in the Library nor in the Vote Office. The hon. Gentleman said the same thing about a notice on a previous occasion. On that occasion I immediately made inquiries and I made clear that if at any stage the Vote Office did not have a complete set of VAT documents it should immediately contact my private office so that I could give the matter the utmost priority to ensure that the House had the documents.
I understand that supplies of Notice 748 were sent to the Vote Office. It is possible that there was a shortage at the moment of time when the hon. Gentleman asked for it. I understand that the Vote Office had a further 100 copies earlier today in addition to those which had already been issued. Therefore, there is no reason why there should be any shortage. I repeat that if any hon. Member finds any difficulty he should let me know personally and I will give the matter priority.
With regard to copies of documents in the Library, we have all had the experience, despite the great efforts made by the staff, of a document which we particularly require not being available. This is a problem which is not always easy to solve. However, if any questions arise in future I shall be happy to ensure that documents concerned with VAT are made available.
In regard to the question of Notice 748 being available for traders, I would point out that these have been available in local VAT offices and via coupons printed in Press advertisements and on application to Her Majesty's Stationery Office's contractors. Therefore, there is no reason why hon. Members should not have the documents concerned.
The first point which I should like to take up is that made by my hon. Friends the Members for Dartford (Mr. Trew) and Leek (Mr. Knox). They both stressed that this tax has been brought in after an unprecedented amount of consultation and discussion with trade interests. Without being complacent about it, that is one reason why the
 


changeover has, generally, taken place very smoothly.
I accept that from time to time there has been a certain lack of communication. One example which I came across was the report of an official visiting a shop who heard a woman demanding "How much of that is VAT?", to which the reply by the bacon slicer was "Not much; you asked for streaky.". Occasional reports suggest that there are communication problems, and I should not wish to say that over the last few days there has not been any difficulty—with such a massive changeover it is to be expected that there are some problems to be settled—but I do not accept the point made by the hon. Member for Heywood and Royton. There has been nothing which can remotely be described as a shambles. As a result of the consultation the changeover has gone remarkably smoothly.
The hon. Gentleman, in the context of his amendment—and this is relevant there —asked about the estimate of the number of traders who ought to be registered for VAT. The original estimate was based on the available statistics, which were not very good, as we have freely admitted, and it now appears that the number of traders due for registration is not as great as we at first believed. I accept that the margin of error has been considerable. This appears to have been due, on the one hand, to group registration, as I told the hon. Member for Heywood and Royton the other day, and, on the other, to the fact that those who are entitled to register have evidently decided at this stage not to do so. The number of taxable traders is now at a level which reflects the numbers likely ultimately to register, but some have an option. The hon. Member for Heywood and Royton has put down many Questions on this subject, and he will be familiar with the most up-to-date answers.
Many of the matters which have been asked are in no way connected with the question of a purchase tax refund. Two hon. Members raised the question of the Youth Hostels Association. I received a deputation from that body and listened with care to what was said before the Budget, but my right hon. Friend did not feel that it would be appropriate to alter
 

the treatment which the association has received.
I was not clear whether, on the amendment, the hon. Member for South Shields (Mr. Blenkinsop) wished to make a specific point with regard to the Youth Hostels Association. It was not entirely clear from what he said. I think I am right in saying that the point has not previously been put to me. If the hon. Gentleman will let me know what he has in mind, either now or in writing, I shall look into it.
My answer to the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) is that the most appropriate thing for him to do is to put down a Question on the point that he raised and I shall gladly seek to give him an answer. I shall write to him about the more general points that he raised.
I now turn to the other points which arise on the amendment, and, in particular, to the point made by the hon. Member for Sheffield, Attercliffe (Mr. Duffy). Throughout our debates on VAT the hon. Gentleman has represented views which reflect the problems faced by small traders, and particularly by those in the news agent and confectionery business. I understand the point that he makes following my right hon. Friend's decision to zero-rate confectionery. This has required some adjustment of the practices of small traders. In particular, it has, in some cases, altered the choice which they are likely to find most to their advantage with regard to the special traders schemes. I have come across this in my own constituency, and I imagine that it is fairly common.
Customs and Excise is well aware of the difficulties which the change, made at a late hour, has caused, and is happy to deal sympathetically with problems of consequential adjustments. If the hon. Gentleman has particular points that he would like to raise I shall be happy to look into them personally. I have not come across any confectioner who is upset, looking to the long term, about the decision to zero-rate confectionery. It is a matter very relevant to the amendments.
I should say something about the amendments, beginning with Amendment No. 2.

10.0 p.m.

Dr. Stuttaford: Before my hon. Friend moves on to his general points on the amendments, will he reply to some of the rest of the debate, which he has rather ruled out of order? What does he propose to do about value added tax now charged on equipment provided by voluntary bodies in hospitals and elsewhere for the care of the sick, a point raised by me and the hon. Member for Swindon (Mr. David Stoddart)?

Mr. Higgins: It is not for me to rule anything in or out of order, and I do not propose to do any such thing. What I seek to do is to reply to the debate on the amendments, as I think is right and proper. There has been some confusion about the scope of the amendments.

Mr. Joel Barnett: Oh. really!

Mr. Higgins: The hon. Member for Heywood and Royton may say that, but he made no attempt to explain precisely what his second amendment, at any rate, was designed to achieve.
Amendment No. 2 would widen the extent of the rebate scheme to include stocks of goods held over by all traders, whether or not they were registered for value added tax. When my right hon. Friend the Chancellor announced the rebate scheme last year he said:
I stress that only registered VAT traders will be able to make a claim, because only in their case would the possibility of double taxation have arisen."—[OFFICIAL REPORT, 7th November 1972; Vol. 845, c. 845.]
The hon. Gentleman disarmingly said that there may be deficiencies in the amendments, and hoped that I would respond in that spirit rather than quibble about the drafting. There are indeed deficiencies in the drafting, but I happily respond in the spirit in which the hon. Gentleman moved his amendment.
I shall first deal with what I had understood the intention of the amendment to be. Those traders who are not taxable persons—that is, those traders exempt and below the £5,000 limit—would receive a refund of purchase tax if the amendment were accepted. But that is not the intention of the scheme, as my right hon. Friend made absolutely clear.
The primary purpose of the rebate scheme has always been to avoid double
 

taxation of unsold stocks of unused goods held at the close of business on 31st March 1973, and to ensure that traders could not use that as a pretext for unjustifiable price increases. The reports we have so far suggest that the scheme has been successful in achieving that objective, which was, as my right hon. Friend said, the objective he had in mind.

Mr. Geoffrey Stewart-Smith: There is a group of people who do a vast amount of voluntary work for hospitals—the friends of hospitals, like those at Derby Royal Infirmary, in my case. The value of their work amounts to more than £5,000 a year. We want specific assurances that they will be exempted from VAT. We do not seem to get any sympathy from the Government on the matter. May we have an answer?

Mr. Higgins: We debated this matter at great length last year. The point we are now discussing and the purpose of these amendments is to give refunds of purchase tax to traders who are exempt, not traders who are taxable.
As I sought to indicate, we do not believe that this extension should be made. Although it is the case that traders may be exempt because they are below the £5,000 limit, they will not have to keep VAT records. They pay VAT inclusive prices where they buy in goods and services and can recover the related input tax only by including it in their selling prices. The crucial point at issue is that the exempt traders, those below the £5,000 limit, do not suffer double taxation on their stocks because they will not be paying output tax on their future sales to which they would otherwise be liable if they were not exempt from VAT.
The hon. Member for Heywood and Royton also questioned whether those who are late in registering should receive a refund of purchase tax. That does not fall strictly within the amendment. The hon. Gentleman will appreciate that those who are due to register are taxable traders and would not, therefore, be covered by his amendment.
Those who are still registering—and there are some—provided they stocktake and fill in the forms in conformity with the rebate scheme within the time limit specified within the Bill as it now stands, will, through the workings of the credit mechanism and the input tax, receive the
 


refund. As the hon. Member for Hey-wood and Royton will appreciate, they will in any case be liable to output tax from the date of commencement of VAT. This is set out clearly in the Finance Act 1972.

Mr. Joel Barnett: The hon. Gentleman appears to be making an important alteration from what he said previously. Perhaps he will correct this. I understood him to say that if any person registered now and submitted his return for purchase tax rebate, he would be able to get it. Does that include those who have not registered by 1st April?

Mr. Higgins: I am not saying anything different from what has already been said. The clause makes the position clear. I ask the hon. Gentleman to read carefully what I said a moment or two ago. I am saying that this applies providing such people conform to all the other requirements relating to stock taking and the date.
I turn now to the amendment moved by the hon. Gentleman as to the date taken with the amendment of the hon. Member for West Lothian (Mr. Dalyell). The object of the amendment is to extend the time for claiming rebate to the end of June 1973. We are unable to accept this amendment. Amongst many other matters, the question of the time limit was carefully considered with the major trade bodies concerned. The period of one month from 31st March 1973 was accepted as striking a reasonable balance. This takes account of the convenience and practicability for traders in general on the one hand and the requirements of effective control on the other.
A number of considerations make it essential to insist on an early submission of the claim. The later the claim is made, the more difficult it will become to make any positive checks that claims are consistent with the stocks held on 31st March. Therefore, there is a case for having a reasonable limit. Secondly, it needs to fit in with the work involved in checking and agreeing claims before the main flow of VAT work commences at the end of the first three-month accounting period. Although the time is relatively short, I do not believe, and nor does the representation we have had from the trade, that it is unreasonably so.
Some traders have been able to do preparatory work before 31st March. The stocktaking requirements are sufficiently flexible to allow many traders to do the major part of their stocktaking before then, leaving the figures to be updated from records of subsequent sales and purchasers. Traders will also have been able to assemble in advance the basic calculation of purchase tax due. We do not believe that there is a case for extending the date. As I have already said, as the law provides, latecomers will be registered from 1st April in order to collect all the debits due. Provided they check all stocks eligible for rebate by 31st March and submit a claim by 30th April they will be entitled to rebate. The hon. Member for Heywood and Royton seemed to think I was saying something new. I am not saying anything new; I am seeking to make the position clear.
For the reasons I have given I do not believe that it would be right to extend the scheme of purchase tax rebate to those traders who are not taxable persons, that is to say, traders who are exempt.
With regard to the date, again for the reasons I have given, the time limit is appropriate. It strikes a balance between the need for control and the convenience of traders, and I ask hon. and right hon. Members to reject the amendment.

Mr. Joel Barnett: I am sorry that the Minister has been more than a little petulant and has tried to usurp the position of the Chair in deciding what is in order. He has refused to answer legitimate questions asked by many hon. Members, including one from his hon. Friend the Member for Norwich, South (Dr. Stuttaford) and other hon. Members on medical matters. I hope that the hon. Gentleman will at least have the courtesy to look into this matter and write to the hon. Members concerned.
The only answer the Minister has given about people who have not registered at 31st March is that this was not the intention of the scheme. He has not answered the debate. Many traders, particularly small ones, have not registered, for many reasons. It is no use being pompous and pious. They did not understand VAT, and one cannot blame them for that.
I hope that hon. Members will note that as the clause stands traders will have to submit their claim for purchase tax rebate on stocks within one month. The claim has to be posted and be in the hands of Customs and Excise in Swansea within one month. That is almost certain to mean that hon. Members will be inundated with complaints

from traders who have been unable to obtain purchase tax rebate on stocks. For those reasons, I ask the Committee to support the amendment.

Question put, That the amendment be made: —

The House divided: Ayes 171, Noes 198.

Division No. 102.1
AYES
[10.14 p.m.


Allaun, Frank (Sallord, E.)
Griffiths, Eddie (Brightside)
Morris, Alfred (Wythenshawe)


Armstrong, Ernest
Hamilton, James (Bothwell)
Morris, Charles R. (Openshaw)


Ashton, Joe
Hamilton, William (Fife, W.)
Morris, Rt. Hn. John (Aberavon)


Barnett, Joel (Heywood and Royton)
Hannan, William (G'gow. Maryhill)
Mulley, Rt. Hn. Frederick


Bennett, James (Glasgow, Bridgeton)
Hardy, Peter
Murray, Ronald King


Bishop, E. S.
Harrison, Walter (Wakefield)
Oakes, Gordon


Blenkinsop, Arthur
Healey, Rt. Hn. Denis
Ogden, Eric


Boardman, H. (Leigh)
Heffer, Eric S.
Orbach, Maurice


Booth, Albert
Hooson, Emlyn
Oswald, Thomas


Broughton, Sir Alfred
Horam, John
Owen, Dr. David (Plymouth, Sutton)


Brown, Hugh D. (G'gow, Provan)
Hughes, Mark (Durham)
Palmer, Arthur


Buchan, Norman
Hughes, Robert (Aberdeen. N.)
Pardoe, John


Buchanan, Richard (G'gow, Sp'burn)
Hughes, Roy (Newport)
Parker, John (Dagenham)


Campbell, I.(Dunbartonshire, W.)
Hunter, Adam
Pavitt, Laurie


Carmichael, Neil
Irvin, Rt. Hn. Sir Arthure (Edge Hill)
Peart, Rt. Hn. Fred


Carter, Ray (Birmingh'm, Northefield)
Jenkins, Hugh (Putney)
Perry, Ernest G.


Clark, David (Colne Valley)
John, Brynmor
Prescott, John


Cocks, Michael (Bristol, S.)
Johnson, James (K'ston-on-Hull, W.)
Price, William (Rugby)


Cohen, Stanley
Jones, Dan (Burnley)
Rees, Merlyn (Leeds, S.)


Concannon, J. D.
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Rhodes Geoffrey


Conlan, Bernard
Jones, T. Alce (Rhondda, W.)
Roberts, Rt. Hn. Goronwy (Caernarvon)


Crawshaw, Richard
Judd, Frank
Roderick, Caerwyn E. (Brc'n&amp;R'dnor)


Cronin, John
Kaufman, Gerald
Rowlands, Tea


Cunningham, G. (Islington, S.W.)
Kelley, Richard
Sandelson, Neville


Dalyell, Tam
Kinnock, Neil
Sheldon, Robert (Ashton-under-Lyne)


Davidson, Arthur
Lambie, David
Short,Rt.Hn.Edward (N'c'tle-u-Tyne)


Davies, Denzil (Llanelly)
Lamond, James
Sillars, James


Davies, G. Elfed (Rhondda, E.)
Lawson, George
Silverman, Julius


Davis, Terry (Bromsgrove)
Leadbltter, Ted
Skinner, Dennis


de Freitas, Rt. Hn. Sir Geoffrey
Lee, Rt. Hn. Frederick
Smith, Cyril (Rochdale)


Dempsey, James
Leonard, Dick
Spearing, Nigel


Doig, Peter
Lewis, Ron (Carlisle)
Spriggs, Leslie


Dormand, J. D.
Lomas, Kenneth
Stallard, A. W.


Douglas, Dick (Stirlingshire, E.)
Loughlln, Charles
Stoddart, David (Swlndon)


Douglas-Mann, Bruce
Lyon, Alexander W. (York)
Stonehouse, Rt. Hn. John


Duffy, A. E. P.
Lyons, Edward (Bradford, E.)
Strang, Gavin


Dunn, James A.
Mabon, Dr. J. Dickson
Thomas,Rt.Hn.George (Cardiff,W.)


Dunnett, Jack
McBride, Nel
Thomas, Jeffrey (Abertillery)


Eadie, Alex
McCartney, Hugh
Urwin, T. W.


Edwards, Robert (Bilston)
McElhone, Frank
Varley, Eric G


Edwards, William (Merioneth)
McGuire, Michael
Wainwright, Edwin


Ewing, Harry
Machin, George
Walden, Brian (B'm'ham, All Saints)


Faulds, Andrew
Mackenzie, Gregor
Walker, Harold (Doncaster)


Fernyhough, Rt. Hn. E.
Mackintosh, John P.
Watkins, David


Fitch, Alan (Wigan)
Maclennan, Robert
Weitzman, David


Fletcher, Ted (Darlington)
McMillan, Tom (Glasgow, C.)
Wellbeloved, James


Foot, Michael
McNamara, J. Kevin
White, James (Glasgow, Pollok)


Forrester, John
Mahon, Simon (Bootle)
Whitehead, Phillip


Fraser, John (Norwood)
Marks, Kenneth
Whitlock, William


Freeson, Reginald
Marquand, David
Williams, Alan (Swansea, W.)


Galpern, Sir Myer
Marshall, Dr. Edmund
Williams, W. T. (Warrlngton)


Garrett, W. E.
Mason, Rt. Hn Roy
Wilson, Alexander (Hamilton)


Gilbert, Dr. John
Mayhew, Christopher
Wilson, Rt. Hn. Harold (Huyton)


Ginsburg, David (Dewsbury)
Melllsh, Rt. Hn. Robert
Wilson, William (Coventry, S.)


GoldIng, John
Mendelson, John
Woof, Robert


Gourlay, Harry
Millan, Bruce
TELLERS FOR THE AYES


Grant, George (Morpeth)
Miller, Dr. M. S
Mr.Donald Coleman and


Grant, John D. (Islington, E.)
Molloy, William
Mr.Joseph Harper.




NOES


Adley, Robert
Atkins, Humphrey
Batsford, Brian


Allason, James (Hemel Hempstead)
Baker, Kenneth (St. Marylebone)
Bell, Ronald


Archer, Jeffrey (Louth)
Baker, W. H. K. (Banff)
Berry, Hn. Anthony


Astor. John
Balniel, Rt. Hn. Lord
Biffen, John




Boardman, Tom (Leicester, S.W.)
Higgins, Terence L.
Parkinson, Cecil


Body, Richard
Hiley, Joseph
Percival, Ian


Bowden, Andrew
Hill, John E. B. (Norfolk, S.)
Powell, Rt. Hn. J. Enoch


Bray, Ronald
Holland, Philip
Price, David (Eastleigh)


Brocklebank-Fowler, Christopher
Holt, Miss Mary
Prior, Rt. Hn. J. M. L.


Bruce-Gardyne, J.
Hornby, Richard
Proudfoot, Wilfred


Bryan, Sir Paul
Hornsby-Smith, Rt.Hn.Dame Patricia
pym, Rt. Hn. Francis


Buchanan-Smith, Alick (Angus,N&amp;M)
Howe, Hn. Sir Geoffrey (Reigate)
Ramsden, Rt. Hn. James


Buck, Antony
Howell, Ralph (Norfolk, N.)
Rawlinson, Rt. Hn. Sir Peter


Burden, F. A.
Hunt, John
Redmond, Robert


Butler, Adam (Bosworth)
Hutchison, Michael Clark
Reed, Laurance (Bolton, E.)


Carr, Rt. Hn. Robert
Iremonger, T. L.
Rees, Peter (Dover)


Chichester-Clark, R.
Irvine, Bryant Godman (Rye)
Rhys Williams, Sir Brandon


Churchill, W. S.
James, David
Ridley, Hn. Nicholas


Clark, William (Surrey, E.)
Jessel, Toby
Rippon, Rt. Hn. Geoffrey


Clegg, Walter
Jones, Arthur (Northants, S.)
Roberts, Wyn (Conway)


Cockeram, Eric
Jopling, Michael
Rost, Peter


Cooke, Robert
Kaberry, Sir Donald
St. John-Stevas, Norman


Coombs, Derek
Kellett-Bowman, Mrs. Elaine
Scott-Hopkins, James


Cooper, A. E.
Kimball, Marcus
Shaw, Michael (Sc'b'gh &amp; Whitby)


Corfield, Rt. Hn. Sir Frederick
King, Evelyn (Dorset, S.)
Sinclair, Sir George


Cormack, Patrick
King, Tom (Bridgwater)
Skeet, T. H. H.


Costain, A. P.
Kinsey, J. R.
Smith, Dudley (W'wick &amp; L'mington)


Crowder, F. P.
Kitson, Timothy
Soref, Harold


d'Avigdor-Goldsmid, Maj.-Gen.Jack
Knox, David
Speed, Keith


Dean, Paul
Lambton, Lord
Sproat, lain


Deedes, Rt. Hn. W. F.
Lamont, Norman
stainton, Keith


Digby, Simon Wingfield
Lane, David
Stanbrook, Ivor


Dixon, Piers
Langford-Holt, Sir John
Stewart-Smith, Geoffrey (Belper)


du Cann, Rt. Hn. Edward
Le Marchant, Spencer
Stokes, John


Dykes, Hugh
Longden, Sir Gilbert
stuttaford, Dr. Tom


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Luce, R. N.
Taylor, Edward M. (G'gow,Cathcart)


Eyre, Reginald
McLaren,Martin
Taylor, Frank (Moss Side)


Fenner, Mrs. Peggy
Maclean, Sir Fitzroy
Taylor, Robert (Croydon, N.W.)


Fidler, Michael
McMaster, Stanley
Tebbit, Norman


Fisher, Nigel (Surbiton)
Macmilan, Rt. Hn. Maurice (Farnham)
Temple, John M.


Fookes, Miss Janet
McNair-Wilson, Michael
Thomas, John Strdling (Monmouth)


Fortescue, Tim
McNair-Wilson, Patrick (New Forest)
Thompson, Sir Richard (Croydon, N. W.)


Fowler, Norman
Madel, David
Tilney, John


Fox, Marcus
Mather, carol
Trafford, Dr. Anthony


Fry, Peter
Mawby, Ray
Trew, Peter


Gardner, Edward
Maxwell-Hyslop, R. J.
Tugendhat, Christopher


Gibson-Watt, David
Meyer, Sir Anthony
Turton, Rt. Hn. Sir Robin


Gilmour, Sir John (Fife, E.)
Mills, Peter(Torrington)
Vaughan, Dr. Gerard


Goodhart, Philip
Mills, Stratton (Belfast, N.)
Waddington, David


Goodhew, Victor
Miscampbell, Norman
Walder, David (Clitheroe)


Gorst, John
Mitchell, Lt.-CoI.C (Aberdeenshire,W)
Walker-Smith,Rt. Hn. Sir Derek


Gower, Raymond
Mitchell, David (Basingstoke)
Ward, Dame lrene


Gray, Hamish
Moate, Roger
Weatherill, Bernard


Green, Alan
Money, Ernle
Wells, John (Maldstone)


Griffiths, Eldon (Bury St. Edmunds)
Monks, Mrs. Connie
white, Roger (Gravesend)


Grylls, Michael
Monro, Hector
Wiggin, Jerry


Gummer, J. Selwyn
Montgomery, Fergus
Wilkinson, John


Hall, Miss Joan (Keighley)
More, Jasper
Wolrige-Gordon, Patrick


Hall, John (Wycombe)
Morgan, Geraint (Denbigh)
Wood, Rt. Hn. Richard


Hall-Davis, A. G. F.
Morgan-Giles, Rear-Adm.
Woodnutt, Mark


Hamilton, Michael (Salisbury)
Mudd, Cavid
Worsley Marcus


Hannam, John (Exeter)
Nabarro, Sir Gerald
Younger, Hn. George


Harrison, Col. Sir Harwood (Eye)
Neave, Airey



Haselhurst, Alan
Noble, Rt. Hn. Michael



Hastings, Stephen
Normanton, Tom
TELLERS FOR THE NOES:


Hawkins, Paul
Nott, John
Mr. Oscar Murton and


Hayhoe. Barney
Oppenheim Mrs. Sally
Mr. Kenneth Clarke.


Hicks, Robert
Page, Rt. Hn. Graham (Crosby)

Question accordingly negatived.

Amendment proposed: No. 4, in page 4, line 40, leave out 'April' and insert ' June'.—[Mr. Joel Barnett.]

Question put, That the amendment be made: —

The Committee divided: Ayes 171, Noes 196.

Division No. 103.]
AYES
[10.24 p.m.


Allaun, Frank (Salford, E.)
Buchan, Norman
Cronin, John


Armstrong, Ernest
Buchanan, Richard (G'gow, Sp'burn)
Cunningham, G. (Islington, S.W.)


Ashton, Joe
Campbell, I. (Dunbartonshire, W.)
Dalyell, Tarn


Barnett, Joel (Heywood and Royton)
Carmichael, Neil
Davidson, Arthur


Bennett, James (Glasgow, Bridgeton)
Carter, Ray (Birmingh'm, Northfield)
Davies, Denzil (Llanelly)


Bishop, E. S.
Clark, David (Colne Valley)
Davies, G. Elfed (Rhondda, E.)


Blenkinsop, Arthur
Cocks, Michael (Bristol, S.)
Davis, Terry (Bromsgrove)


Boardman, H. (Leigh)
Cohen, Stanley
de Freitas, Rt. Hn. Sir Geoffrey


Booth, Albert
Concannon, J. D.
Dempsey, James


Broughton, Sir Alfred
Conlan, Bernard
Doig, Peter


Brown, Hugh D. (G'gow, Provan)
Crawshaw, Richard
Dormand, J. D.




Douglas, Dick (Stirlingshire, E.)
Judd, Frank
Owen, Dr. David (Plymouth, Sutton)


Douglas-Mann, Bruce
Kaufman, Geralo
Palmer, Arthur


Duffy A. E. P.
Kelley, Richard
Pardoe, John


Dunn, James A.
Kinnock, Nell
Parker, John (Dagenham)


Dunnett, Jack
Lamble, David
Pavitt, Lauri


Eadie, Alex
Lamond, James
Peart, Rt. Hn. Fred


Edwards, Robert (Bilston)
Lawson, George
Perry, Ernest G


Edwards, William (Merioneth)
Leadbitter, Ted
Prescott, John


Ewing, Harry
Lee, Rt. Hn. Frederick
Price, William (Rugby)


Faulds, Andrew
Leonard, Dick
Rees, Merlyn (Leeds, S.)


Fernyhough, Rt. Hn. E.
Lewis, Ron (Carlisle)
Rhodes, Geoffrey


Fitch, Alan (Wigan)
Lomas, Kenneth
Roberts, Albert (Normanton)


Fletcher, Ted (Darlington)
Loughlin, Charles
Roberts, Rt. Hn. Goronwy (Caernarvon)


Foot, Michael
Lyon, Alexander W. (York)
Roderick, Caerwyn E. (Brc'n&amp;R'dnor)


Ford, Ben
Lyons, Edward (Bradford, E.)
Rowlands, Ted


Forrester, John
Mabon, Dr. J. Dickson
Sheldon, Robert (Ashton-under-Lyne)


Fraser, John (Norwood)
McBride, Neil
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Freeson, Reginald
McCartney, Hugh
Sillars, James


Galpern, Sir Myer
McElhone, Frank
Silverman, Julius


Carrett, W. E.
McGuire, Michael
Skinner, Dennis


Gilbert, Dr. John
Machin, George
Smith, Cyril (Rochdale)


Ginsburg, David (Dewsbury)
Mackenzie, Gregor
Spearing, Nigel


Golding, John
Mackintosh, John P.
Spriggs, Leslie


Gourlay, Harry
Maclennan -in, Robert
Stallard, A. W.


Grant, George (Morpeth)
McMillan, Tom (Glasgow, C.)
Stoddart, David (Swindon)


Grant, John D. (Islington, E.)
McNamara, J. Kevin
Stonehouse, Rt. Hn. John


Griffiths, Eddie (Brlghtside)
Mahon, Simon (Bootle)
Strang, Gavin


Hamilton, James (Bothwell)
Marks, Kenneth
Thomas, Rt. Hn. George (Cardiff,W.)


Hamilton, William (Fife, W.)
Marquand, David
Thomas, Jeffrey (Abertillery)


Kannan, William (G'gow, Maryhill)
Marshall, Dr. Edmund
Urwin, T. W.


Hardy, Peter
Mason, Rt. Hn. Roy
Varley, Eric G


Harrison, Walter (Wakefield)
Mayhew, Christopher
Wainwright, Edwin


Healey, Rt. Hn. Denis
Mellish, Rt. Hn. Robert
Walden, Brian (B'm'ham, All Saints)


Heller, Eric S.
Mendelson, John
Walker, Harold (Doncaster)


Hooson, Emlyn
Millan, Bruce
Watkins, David


Horam, John
Miller, Dr. M. S
Weitzman, David


Hughes, Mark (Durham)
Mlie, Edward
Wellbeloved, James


Hughes, Robert (Aberdeen, N.)
Molloy, William
White, James (Glasgow, Pollok)


Hughes, Roy (Newport)
Morris, Alfred (Wythenshawe)
Whitehead, Phillip


Hunter, Adam
Morris, Charles R. (Openshaw)
Whitlock, William


Irvine, Rt. Hn. Sir Arthur (Edge Hill)
 Morris, Rt. Hn. John (Aberavon)
Williams, Alan (Swansea, W.)


Jenkins, Hugh (Putney)
Mulley, Rt. Hn Frederick
Williams, W. T. (Warrington)


John, Brynmor
Murray, Ronald King
Wilson, William (Coventry, S.)


Johnson, James (K'ston-on-Hull, W.)
Oakes, Gordon
Woof, Robert


Jones, Dan (Burnley)
Ogden Eric



Jones,Rt. Hn. SirElwyn (W.Ham,S.)
Orbach, Maurice
Mr. Donald Coleman and


Jones, T. Alec (Rhondda, W.)
Oswald, Thomas
Mr. Joseph Harper.




NOES


Adley, Robert
Crowder, F. P.
Harrison, Col. Sir Harwood (Eye)


Allason, James (Hemel Hempstead)
 d'Avigdor-Goldsmid, Maj.-Gen. Jack 
 Haselhurst, Alan


Archer, Jeffrey (Louth)
Dean, Paul
Hastings, Stephen


Astor, John
Deedes, Rt. Hn. W. F.
Hawkins, Paul


Atkins, Humphrey
Digby, Simon Wingfield
Hoyhoe, Barney


Baker, Kenneth (St. Marylebone)
Dixon, Piers
Hicks, Robert


Baker, W. H. K. (Banff)
du Cann, Rt. Hn. Edward
Higgins, Terence L.


Balmel, Rt. Hn. Lord
Dykes, Hugh
Hiley, Joseph


Batsford, Brian
Elliott, R.W. (N'c'tle-upon-Tyne, N.)
Hill, John E. B. (Norfolk, S.)


Bell, Ronald
Eyre Reginald
Holland, Philip


Berry, Hn. Anthony
Fenner, Mrs. Peggy
Holt, Miss Mary


Biffen, John
Fidler, Michael
Hornby, Richard


Boardman, Tom (Leicester, S.W.)
Fisher, Nigel (Surbiton)
Hornsby-Smith, Rt. Hn. Dame Patricia


Body, Richard
Fookes, Miss Janet
Howell, Ralph (Norfolk, N.)


Bowden, Andrew
Fortescue, Tim
Hunt, John


Bray, Ronald
Fowler, Norman
Hutchison, Michael Clark


Brocklebank-Fowler, Christopher
Fox, Marcus
Iremonger, T. L.


Bruce-Gardyne, J.
Fry peter
Irvine, Bryant Godman (Rye)


Bryan, Sir Paul
Gardner, Edward
James, David


Buchanan-Smith, Alick (Angus,N &amp; M)
 Gibson-Watt David
Jessel, Toby


Buck, Antony
Gilmour, Sir john (Fife, E.)
Jones, Arthur (Northants, S.)


Burden, F. A.
Goodhart Philip
Jopling, Michael


Butler, Adam (Bosworth)
Goodhew Victor
Kaberry, Sir Donald


Carr, Rt. Hn. Robert
Gorst, John
Kellett-Bowman, Mrs. Elaine


Chichester-Clark, R.
Gower, Raymond
Kimball, Marcus


Churchill, W. S.
Gray Hamish
King, Evelyn (Dorset, S.)


Clark, William (Surrey, E.)
Green, Alan
King, Tom (Bridgwater)


Clegg, Walter
Griffith's, Eldon (Bury St. Edmunds)
Kinsey, J. R.


Cockeram, Eric
Gryils, Michael
Kitson, Timothy


Cooke, Robert
Gummer, J. Selwyn
Knox, David


Coombs, Derek
Hall, Miss Joan (Keighley)
Lambton, Lord


Cooper, A. E.
Hall, John (Wycombe)
Lamont, Norman


Corfield, Rt. Hn. Sir Frederick
Hall-Davis, A. G. F.
Lane, David


Cormack, Patrick
Hamilton, Michael (Salisbury)
Langford-Holt, Sir John


Costain, A. P.
Hannam, John (Exeter)
Le Marchant, Spencer







Longden, Sir Gilbert
Page, Rt. Hn. Graham (Crosby)
Taylor, Edward M.(G'gow,Cathcart)


Luce, R. N.
Parkinson, Cecl.
Taylor, Frank (Moss Side)


Maclean, Sir Fitzroy
Percival, Ian
Taylor, Robert (Croydon, N.W.)


McMaster, Stanley
Powell, Rt. Hn. J. Enoch
Tebbit, Norman


Macmillan, Rt. Hn. Maurlce(Farnham)
Price, David (Eastleigh)
Temple, John M.


McNair-Wilson, Michael
Prior, Rt. Hn. J. M. L.
Thomas, John Stradling (Monmouth)


McNair-Wilson Patrick (New Forest)
Proudfoot, Wilfred
Thompson, Sir Richard (Croydon, S.)


Madel, David
Pym, Rt. Hn. Francis
Tilney, John


Mather, Carol
Ramsden, Rt. Hn. James
Trafford, Dr. Anthony


Mawby, Ray
Rawlinson, Rt. Hn. Sir Peter
Trew, Peter


Maxwell-Hyslop, R. J.
Redmond, Robert
Tugendhat, Christopher


Meyer, Sir Anthony
Reed, Laurance (Bolton, E.)
Turton, Rt. Hn. Sir Robin


Mills, Peter (Torrington)
Rees Peter (Dover)
Vaughan, Dr. Gerard


Mills, Stratton (Belfast, N.)
Rhys Williams, Sir Brandon
Waddington, David


Miscampbell, Norman
Ridley, Hn. Nicholas
Walder, David (Clitheroe)


Mitchell, Lt.-Col. C.(Aberdeenshire, W)
RippOn, Rt. Hn. Geoffrey
Walker-Smith, Rt. Hn. Sir Derek


Mitchell, David (Basingstoke)
Roberts, Wyn (Conway)
Ward, Dame Irene


Moate, Roger
ROst, Peter
Weatherill, Bernard


Money, Ernie
St. john-Stevas, Norman
Wells, John (Maidstone)


Monks, Mrs. Connie
Scott-Hopkins, James
White, Roger (Gravesend)


Monro, Hector
Shaw, Michael (Sc'b'gh &amp; Whitby)
Wiggin, Jerry


Montgomery, Fergus
Sinclair, Sir George
Wilkinson, John


More, Jasper
Skeet, T. H. H.
Wolrige-Gordon, Patrick


Morgan, Geraint (Denbigh)
Smith, Dudley (W'wlck &amp; L'mington)
Wood, Rt. Hn. Richard


Morgan-Giles, Rear-Adm.
Soref, Harold
Woodnutt, Mark


Mudd, David
Speed, Keith
Worsley, Marcus


Nabarro, Sir Gerald
Sproat, lain
Younger, Hn. George


Neave, Airey
Stainton, Keith



Noble, Rt. Hn Michael
Stanbrook, Ivor
TELLERS FOR THE NOES:


Normanton, Tom
Stewart-Smith, Geoffrey (Belper)
Mr Oscar Murton and


Nott, John
Stokes, John
Mr. Kenneth Clarke.


Oppenheim, Mrs. Sally
Stuttaford, Dr. Tom



Question accordingly negatived.

10.30 p.m.

Mr. Joel Barnett: I beg to move Amendment No. 5, in page 5, leave out lines 16 to 20.

The Second Deputy Chairman (Mr. E. L. Mallalieu): With this amendment the Committee is to discuss Amendment No. 6, in page 5, leave out lines 32 to 38.

Mr. Barnett: These are proving amendments, of which the Financial Secretary is aware. I am sure that he will not need to be too bad tempered about these amendments. We should be glad to have an explanation.

Mr. Higgins: At no stage of the proceedings have I been the least bad tempered. I was merely anxious to remain within the bounds of order.
I was told by one of my hon. Friends just now that last year we had many proving amendments. Apparently this year we are to have symbolic amendments. Our last debate might have been symbolic. The hon. Member has said that this is a proving amendment. We know from our similar debates last year that all he wants is an explanation of what his own amendment is about. I do not want to slow down the proceedings, so I shall be happy to explain it to him.
The amendment would remove the provision under which the rebate on purchase tax is limited to an amount calculated by reference to the rates of tax in force on 7th November 1972, so effectively it would be related to possible higher or lower amounts of tax which might have been in force on some occasion before then.
It is no part of the rebate scheme to compensate for any loss sustained by retailers through earlier purchase tax reductions. Previously, no compensation has been paid on such occasions and to do so now would be particularly unfair on those traders who have already written off or cut their tax losses on such goods. This approach is in line with the recommendations of the Hutton Committee which reported on this problem in 1953, and whose recommendations have been consistently followed by successive Governments.
On Amendment No. 5, it will not be necessary for us to follow the recommendations of the Hutton Committee under VAT, because the problem of the loss of value on tax-paid stocks when there is a reduction in tax will not arise.

[Sir ROBERT GRANT-FERRIS in the Chair]

Amendment No. 6 is slightly more complicated. It would remove the provision whereby rebate on revenue duty is established as an amount calculated by reference to the rates of duty in force on 7th November 1972, the date when the rebate scheme was announced. Rebate would then have to be calculated by reference to the duty actually paid on a trader's stocks. Amendment No. 5 would remove a parallel provision in respect of purchase tax.

However, the effect of the two amendments is opposite. In the case of purchase tax, the rates in force on 7th November reflect previous reductions in 1971 and 1972, whereas in the case of revenue duty the rates in force on 7th November reflect the series of increases between April 1964 and April 1969.

Consequently, the purchase tax amendment would in some cases increase the rebate due, while that on the revenue duties would, for some goods, reduce or even remove altogether the rebate which is due.

We have found that the Opposition do not always wish to press proving amendments to a Division, and I doubt whether they would wish to press Amendment No. 6. I would not recommend that they should press either. The purpose of the Chancellor's rebate scheme is to give rebates with reference not to earlier rates of duty but only to those which existed at the date when my right hon. Friend announced the scheme. On that basis it would be right to reject the amendments. The hon. Member for Heywood and Royton (Mr. Joel Barnett) did say that their only purpose was to clarify the situation.

Mr. Barnett: I am sure that that explanation will be absolutely clear, particularly when hon. Members have read it seven or eight times. All will then


be the same sweetness and light as the Financial Secretary finds in respect of the whole tax. In view of those pleasantries, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Dr. John Gilbert: I beg to move Amendment No. 7, in page 6, line 1, leave out subsection (4).
It is very much at the option of the Financial Secretary whether this is a proving, probing or symbolic amendment. I have enough material to make it quite a good proving amendment, but, in view of the lateness of the hour, I will settle for its being a probing amendment.

Mr. Higgins: Perhaps I may respond to the amendment in the spirit in which it was moved, which I always endeavour to do. That only goes to show how much more sweetness and light there is if one remains in order.
The point to be made is that the basic objection to the amendment is that it would increase the amount of rebate payable on some revenue duty-paid stocks for no good reason so far advanced. It would complicate the working of the scheme unnecessarily. The new rates of revenue duties effective from 1st April 1973 take account of two factors. First, there are reductions to compensate for the introduction of VAT. Secondly, reductions in the protective elements of certain revenue duties take effect on the same day in relation to EEC imports only, consistent with our Community obligations. The cuts in the protective elements are irrelevant to the rebate scheme, since they are in no way connected with the abatement of rates which has been made to take account of the imposition of VAT.
The proper basis for calculating the rebate is the difference between pre- and post-VAT rates of the revenue duties, exclusive of these special cuts for goods imported after 31st March from EEC countries. This is what the clause at present provides and rebate calculated on this basis will wholly avoid double taxation of stocks duty-paid prior to the introduction of VAT. So we do not feel we wish to extend the scheme in this way or introduce a totally different scheme which was not in our minds at

any stage in our initial consideration of this matter. Therefore, I suggest that the Committee should resist the amendment. I trust that it will not be pressed to a Division, in view of the explanation I have given.

Dr. Gilbert: Thanks to the courtesy of the Financial Secretary, we now have the basis of a full-scale debate on the economic virtues of our joining the EEC. However, it would probably be unwise to diverge that far and put such a strain on the charity of the Chair at this time. Therefore, we quite happily beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Murton.]

Committee report Progress; to sit again to-morrow.

Orders of the Day — ADJOURNMENT

Motion made and Question proposed, That this House do now adjourn.—[Mr. Murton.]

Orders of the Day — ADULT EDUCATION

10.43 p.m.

Mr. James Boyden: We can all agree with the last few words of the Secretary of State for Education and Science on the Russell Committee Report, that it has been comprehensive and thorough. Whether I shall get any more enlightenment tonight on what the Government propose to do about the report is a different matter. Judging by the answers to Questions I received today the whole Department is making a very serious study of the report. However, the Government have had the report for a full four months. They presumably have been advised how the recommendations were likely to go, and were therefore in a position to make some announcements about some of the principles behind the report.
The report's general tone is that adult education bodies have been doing a good job. They need more support, particularly financial support. I would have thought that the Government would be in


a position to say that they welcome the general outline of the report, that they accept its conservative nature, that there is not much wrong with the voluntary bodies and the way in which adult education is tackled, and that they agree that more money and more effort is required from the Government.
All the matters of consultation which I have no doubt the Secretary of State will go through are dependent on a clear lead from the Secretary of State that the money will be forthcoming and an assurance that the Government will show a more active interest in adult education than they have in the past.
As all the newspapers which are interested in this matter have been saying, the amount of money involved is relatively small. This branch of education has been neglected for many years. I can remember the time when I was part of a deputation which went to see the then Minister of Education, Lord Eccles as he now is, and when we were sent away with his phrase ringing in our ears, "There are no votes in adult education". We realised that from the way in which we were received and the way in which our case for increased interest and more money was turned down. The noble Lord is still in the Government. I hope that his views do not prevail. Even if such a cynical view is in the minds of some Ministers, I hope that the Secretary of State will take a genuine interest in the recommendations and make some attempt to repair the omissions of the past.
If money is forthcoming in reasonable quantities, there can be a great flowering of adult education in the next few years. One of the excellent features of the Russell recommendations is that they are relatively short-term and can be put into operation quite quickly. If there is money available and if energy is displayed by the Department of Education and Science the objectives outlined in the report can be achieved in between five and seven years. This is very rare with reports on education. Some of the great reports that we have had have taken a long time to get into motion and have not had the compactness and practical recommendations that this report contains.
I very much hope that the Undersecretary will be forthcoming in a general way about the Government's attitude to

the money, that provision will be made in the next set of Estimates, and that all the bodies which the Secretary of State intends to consult will be told at once that they can go ahead with plans for the future because reasonable sums will be available.
Allied to that is the fact that active ministerial interest in adult education has been missing from the centre for a long time. It is incumbent upon the Secretary of State to take an active interest in it. She should indicate those areas in which she thinks there are deficiencies and where she thinks effort is required. At the very least, the Under-Secretary should have added burdens put upon him. A large amount of his time in the next year or so should be devoted to looking after the various needs of adult education. It would be even better if a special Minister were appointed for two or three years to consult the voluntary bodies and LEAs, the Government having made up their minds about the main recommendations, and to assist them in drawing up their plans.
I understand from newspaper reports that the Secretary of State has already reorganised the Civil Service in her Department. A new division has been set up to deal with adult education. This is not before time. When I went to the Department in 1964, the adult education side seemed to be run by a bright HEO. Interest in adult education among the top levels of the Department was very sparse. There has not been a great deal of improvement in the interest shown on the part of the Department. There will need to be an effort from Ministers to galvanise the Department to deal with the mass of detail which will arise in carrying out the administrative decisions flowing from the report.
There are a number of areas in which the Secretary of State could make a declaration which would be helpful in dealing with the follow-up detail which will require time in terms of consultation. Certain things need to be made clear, so that consultation can flow on the exact details. For example, the Development Council for England and Wales for Adult Education is a new concept. Most of the educational Press take this as a watch dog to see that the Minister and her partners in adult education are kept up to scratch. One weakness in the 1944


Act was that after the flurry of activity in the early years, interest in the Department tailed off and there was a long fallow period when voluntary bodies and local education authorities were left to jog along. I hope that an early announcement will be made informing us when the development council is to be set up.
The Department should also announce that it is working on a comprehensive and varied service for adult education which the committee recommends should be set up, and that within a fairly short time advice and directions to local authorities will be issued. This aspect should not be allowed to get into a rut, as happened after 1950.
The third matter which is important is a long-term consideration, but one on which an early announcement needs to be made. This relates to the Department's recruiting the extra staff needed. An early indication of a considerable expansion in the number of adult tutors would be helpful.
There is one area in which the Committee's recommendations break new ground. I refer to those recommendations which ask for special attention to be paid to the needs of education for the handicapped and the disadvantaged. Local education authorities and local authorities generally are moving into a new field of activity. We all appreciate that new directors of social services are being set up within local authorities and that these new departments are in process of being organised. Again, it would be helpful if the Government were to give a clear indication that this is to be a growth point to be backed by the Department and, indeed, by other Government Departments.
One area of the report on which I have campaigned has received rather timid attention from the committee. I refer to paragraph 255, relating to long-term residential colleges. The committee has made a number of recommendations which are all of an administrative nature and which will be easy to put into effect. I see no reason why an early announcement should not be made that those recommendations will be accepted. This would ease the burden on the colleges and assist them in their job of teaching.
The committee recommends that one extra college should be located in the

North. I have for many years campaigned for a college in Durham, where the county council, the university and the Workers' Education Association have always shown great interest in such a project. However, I think that the recommendation is timid, in that there is a great untapped demand for a long-term residential institution. Merely to strengthen the existing organisation is satisfactory, but in the same way that before 1964 the Conservative Government were very slow to recognise the contribution which mature students could make to the teaching profession, so the Russell Committee has been timid in thinking that there was room only for one more college and in respect of the strengthening of existing colleges. There is no reason why there should not be an announcement fairly soon that the administrative measures which the colleges want and the Russell Committee recommends will be put into operation.
One matter which will need discussion, which is fundamental for voluntary bodies, is the committee's recommendation that the responsible bodies should go and that universities and the Workers' Educational Association, with direct grant from the Department, should be treated as entities in themselves.
The Workers' Educational Association come very well out of the report. The committee recommends the strengthening of many of its existing functions and finds them all satisfactory. It draws attention to what many of us have been urging for a long time, namely, that only lack of money prevents much more activity by the WEA. In the same way, it is vital that in trying to strengthen the education side of universities the UGC should take a much more positive rôle.
This is undoubtedly a matter for consultation with responsible bodies, colleges and the WEA. I hope that throughout the consultations, the Secretary of State will take a positive line and that the change from the responsible bodies to a wider concept will in no way inhibit the maximum flow of funds from universities, the Department and local education authorities into this work. A statement of that kind could be made quite soon. It would be of help to existing responsible bodies, the extra-mural bodies and the Workers' Educational Association, as they make plans.
There are two general matters to which I should refer. With the great development of interest in adult education in Europe, the desire for qualifications to be of the right status and the need for professionally qualified people throughout Europe—a debate on this subject has been taking place in the other House today—I hope that in its consultations on the long-term requirements the Department will ensure that universities are enthusiastic about building up a system of credit for adults on the American style of degrees, diplomas, and other qualifications, not only in our territory but in relation to growing developments in Europe.
We are disappointed that the Russell Committee took an offhand and insular view of permanent education. The Council of Europe has been developing this concept for a long time. In practical terms, in Britain, we are fairly good at this, but we do not philosophise about it, and perhaps the philosophising of the French and Germans on this puts us off. The Russell Committee puts this on one side, saying that to evolve a scheme of permanent education would take too long, and therefore it is not for us at the moment.
In a sense that is one of the general weaknesses of the report. It looks only at what is going on and only a short time ahead—but it is precisely for that reason that it should be welcomed by a Conservative Government. It should lend itself to being put into operation easily and quickly. I hope, therefore, that the Under-Secretary will be able to give a general indication that the Government are prepared to do their part in what Russell recommends.
Having had the report for four months, the Government must know what general principles, amongst the mass of detail, they can declare. I hope that they will give an assurance that time will be found in the near future for a full debate on the report. My views tonight are those to which I think quick answers can be given. I hope there will be a general assertion that the money and departmental interest will be there, so the recommendations of this practical and sound report can be carried out in the minimum of time.

11.1 p.m.

The Under-Secretary of State for Education and Science (Mr. Norman St. John-Stevas): First, I thank the hon. Member for Bishop Auckland (Mr. Boyden) for having raised this most important topic of the Russell Report on Adult Education. I pay tribute to the hon. Gentleman's long and active association with adult education, first in a teaching capacity—when he was a lecturer at a number of university extramural departments, and later director at Durham—and, more recently, in the rather broader capacity, which he has so ably exercised tonight, of advocate for a bigger and better system of adult education, with its own separate structure and identity. No one in the House has done more than the hon. Gentleman for adult education.
In a very much smaller way I have been concerned with the work of the Workers' Educational Association. When I was starting my brief and quite un notable career at the Bar I was very grateful to the association because it provided me with one of my few means of support during that period. I was glad to receive the modest fees which were involved in interesting myself in lectures for adult education, but I found it much a more rewarding experience educationally than financially.
The hon. Gentleman mentioned the previous relationship with my noble Friend, Lord Eccles. My noble Friend has maintained his interest in adult education because, after all, what is an interest in the arts, which he has done so much to sponsor, but a form of adult education which is a remarkably painless way of deepening one's knowledge and one's own and other people's culture?
I share the hon. Gentleman's views about the importance of the contribution made by the report to the discussion of an important subject, and I gladly acknowledge the debt that is due to Sir Lionel Russell and his colleagues for the great amount of work which they have put in over such a long period in producing such a thorough and comprehensive survey of the present situation.
The hon. Gentleman said that we had had the report in the Department for four months. That is true, but the report was published only a fortnight ago and


despite the zeal of the hon. Gentleman and the capacity for work of my right hon. Friend, which the House knows so well, a fortnight is not long enough to put in train the consultations which must take place with those organisations which have a special interest in this subject. But I can tell the hon. Gentleman that we are preparing the ground for this.
The report is a very long and detailed document. It took four years to compile. Perhaps I may say something of its main themes. The hon. Gentleman has touched on a number of them, but, given the dimensions of the subject, I hope to say something about them without treading over the same ground.
The first point I should like to make is that in our society the demand for all kinds of education, and especially education during adulthood, will increase. There are a variety of reasons for this. The population is increasing. It is a better educated population that we have ever had, and better educated people demand more educational provision. Economic considerations require people to accept change and prepare for a second or third career, or for early retirement or redundancy. The pace of change will undoubtedly be hastened by our membership of the European Community. Social mobility is on the increase and it demands new social skills. Changing patterns in child education require changing provision for parents and for children when they become adult, especially in leisure-time activities.
Although we may not call what is needed l'education permanent, in the French manner, I believe—whatever the Russell Report may say on the point— that it is precisely with that concept that the report is dealing, and that we are entering into a situation in which education will and must continue throughout life.
Next, the report makes the point that many people do not reach their full potential during the years normally associated with full-time education. It is in the interest of society to provide opportunities for such people, in adulthood, to train or retrain for more exacting and skilful occupations than they would otherwise be qualified to follow. Many of these people are handicapped, live in areas of social deprivation, or are
 

otherwise disadvantaged. Adult education is one instrument to be used to improve the capacities of such people as individuals and as citizens.
Thirdly, the report deals with the evolution of industrial society, with its better educated, more affluent and more leisured adult population. The service has the potential to make a worthwhile contribution to the social health and well-being of the community as a whole, and should not be thought of only as either a matter of personal cultivation or as part of the process of preparation for vocational change or advancement. But it is a process; the process of adult education is something of value in itself to society.
The report indicates that opportunities for the development of adult aducation are already extraordinarily widespread at all levels through clubs, societies, organisations, institutions, and so on. More deliberate effort should be devoted to the cultivation of this potential. Relatively small grants paid to national bodies in respect of their general educational work and to local groups in respect of local activities are instrumental in releasing for adult education considerable voluntary effort as well as other resources at the disposal of these organisations.
Finally, the report claims that the value of adult education is not solely to be measured by direct increases in earning power or productive capacity, or by any other materialistic yardstick, but by the quality of life it inspires in the individual and generates for the community at large. No academic subject or social or creative activity is superior to another, provided that those engaged in it develop a greater awareness of their own capacities and a more certain knowledge of the totality of their responsibilities as human beings.
If we look at the state of our society today—the permissive society, as it has come to be known—we should have to be complacent indeed not to be alarmed at certain features of it, and at the sort of society, moral and intellectual, that we are creating. The negative form of response to that society is perhaps epitomised in the approach of those like Lord Longford and Mrs. Mary White-house, who, with, I am sure, sincere motives, adopt what I often think is


rather a negative approach to these problems. Adult education is a positive contribution towards solving these problems. It is meeting a moral crisis not by negative proscriptions but by seeking to provide postive good for people's minds and thoughts.
If the hon. Gentleman tells me that the Department should show interest in this subject, I tell him that it is already showing the most intense interest in it. If he says that a special Minister should be concerned with this subject, I say that I believe that that is unnecessary, because both my right hon. Friend and I are extremely interested in the issues involved. I shall be going to Bangor just before Easter, to the Conference of the National Institute or Adult Education, to speak about the report and its contribution to our life.
It was right that the report should be published as quickly as possible, to give the earliest opportunity for discussion, but it is also right that the fruit of nearly four years' work by a distinguished committee should be carefully weighed before

decisions are taken on its recommendations. My right hon. Friend believes that, as part of this process, she should at the appropriate time—which will be soon—have the benefit of comment from those who provide, use or are otherwise involved in the adult education service. The report is a thorough-going examination—the first for about 50 years—of adult education in this country. We must be sure that whatever steps are taken as a result of it are the right ones.
I conclude by expressing again to the hon. Gentleman our sense of appreciation that he has chosen this subject for an early Adjournment motion. I assure him of the Department's concern and my own personal interest in the subject. We look forward to having the advice which I am sure he will be willing to give us and the questions which he will raise on this subject, to which he has made such a notable contribution.

Question put and agreed to.

Adjourned accordingly at twelve minutes past Eleven o'clock.